Reader DB asks: "My son, 18, is starting college. I know it's important that he learn to build and maintain good credit. What's the right way to start doing that?"
Guiding your new college student toward building their own credit profile is a great, proactive step! Assuming your child is starting with a completely blank slate as far as their credit report and score, the right move is usually to just apply for one "regular" credit card. By which, I mean: you don't necessarily need a card specifically targeting college students. A no-fee, no-frills card that earns modest cash back is probably the place I'd start. Some that fit the bill are:
- AMEX EveryDay
- Chase Freedom Unlimited (or Flex)
- Citi Double Cash
- Fidelity Rewards
- American Airlines Advantage MileUp
- Amtrak Guest Rewards
- Delta AMEX Gold
- JetBlue BarclayCard
- United Explorer
What you want to avoid here are any cards with:
- annual fees - you can play the rewards maximization game later
- with gimmicky marketing and/or college-branding - these often have uncompetitive terms and ancillary fees
- with teaser 0% APR purchase rates - because you don't want to incentivize revolving a balance
Once he has the card, instruct him to make sure he uses only a portion of his limit, because carrying a high balance as a percentage of the limit will work against his score.
What If He Gets Denied
You want to apply for just one card. If denied, you may want to apply for one other card from a different issuing bank. But if you get a couple of denials, perhaps wait for the feedback letters from the banks as to why, or go ahead and download your son's free credit reports to make sure nothing unusual is going on.Assuming the report is fine and you get denied anyway, consider a Secured Credit Card, which like a hybrid of a debit card and credit card. You deposit money into the account and that becomes your limit. There's no risk of missed payments or getting in to debt while learning to manage the card, because you can only use hard money. This will report to the bureaus and create a positive history that will eventually unlock approvals for regular credit cards and other instruments.
Are There Other Options?
Yes! If your own credit is good, you can help your son's credit score by adding him as an Authorized User on an account of yours. This will let him free ride on your credit reporting and, more importantly, your long payment history, which will begin jointly reporting to the bureaus for him. This can be in conjunction with, or in place of, getting him an account as the responsible payor. But note if your own credit history has some dings, you will inadvertently harm your son's score out of the gate.
Also, have your son (co-)sign for some of his own student loans if those are appropriate for financing his tuition. These will help show a diversifying mix of credit on his report.
