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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127680  
Subject: College Student's Credit Rating Date: 1/23/2014 10:29 AM
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Our son is in college, has a credit card cosigned by DH, which he pays off in full every month without carrying a balance. He has no student loans, which is the typical way for a college student to build credit, and no debt.

In terms of credit rating, does it make sense for him to carry an occasional small balance? Would that improve his credit score, or does paying it off in full help the most?

IP
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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126759 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 10:36 AM
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In terms of credit rating, does it make sense for him to carry an occasional small balance? Would that improve his credit score, or does paying it off in full help the most?

No, it makes no sense whatsoever for him to carry a balance because having a balance or not does not affect the credit rating.

Tell him to continue to pay it off in full every month. It is his responsible behavior that will affect his credit card the most.

FYI - my kids have FICO scores in the 750-800 range, have had a co-signed credit card since high school, and have both always paid in full. It is just time and responsible behavior that will impact his rating.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126760 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 10:48 AM
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Thanks 2gifts.

IP

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126761 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 1:00 PM
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Hi IP,

In terms of credit rating, does it make sense for him to carry an occasional small balance? Would that improve his credit score, or does paying it off in full help the most?

2gifts said;
Tell him to continue to pay it off in full every month. It is his responsible behavior that will affect his credit card the most.

A. Carrying a balance on revolving credit doesn't positively effect credit scores, paying it off each month is as good as it gets,

B. 'Responsible behaviour' is, unfortunately, not related to credit scores/rating. Avoiding unecessary credit, and keeping your name and records out of the system entirely would be far more responsible... but that would work against you (and your son.)

If he wants to be maximally creditable, he should build the basic credit profile, as follows;
1. 3 reporting revolving accounts, active (meaning used no less than each 60 day period,) but paid each cycle (no balance carried.) If you can add him to 2-3 of your own long-established accounts in-good-standing, the time history will work in his favor... else, his credit will only strengthen relative to the passing of time of his own sole accounts.
2. 2 reporting installment accounts (car, furniture, equipment/computer, etc.) This is a lesser factor than revolving, but not insignificant. Again "responsibility" would say to avoid this entirely.... but if the best credit rating is desired, it needs to be managed. Taking advantage of 'zero interest' installment loans (and making sure not to get bitten by the cascading deferred interest if you are even 1 day late after the teaser deal,) is one way to take advantage of this.
3. A mortgage. Granted, for your son's intents this is the chicken before the egg (or vice versa?) But at some point a housing installment debt will have a rapidly strengthening effect to his credit strength.

Luck,
Dave Donhoff
Leverage Planner

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126762 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 1:03 PM
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B. 'Responsible behaviour' is, unfortunately, not related to credit scores/rating. Avoiding unecessary credit, and keeping your name and records out of the system entirely would be far more responsible... but that would work against you (and your son.)

I guess I should have defined what I think of as "responsible behavior." That would be things like always paying on time and not using up a huge percentage of the available credit. I believe both of these are considered in terms of a credit rating. Late payments will cause negative hits to the credit rating, as will using too high of a percentage of the available credit.

I don't consider never using credit to be part of what I termed "responsible behavior" and didn't consider that some people would, so I should have been more clear in my reply.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126763 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 4:04 PM
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If you can add him to 2-3 of your own long-established accounts in-good-standing, the time history will work in his favor... else, his credit will only strengthen relative to the passing of time of his own sole accounts.

Thanks Dave. My two cards are already joint with DH, can you put a third person on? I don't mind letting Eldest simply build credit over time. We have to be careful to do for him what we are willing to do for his brother. While Eldest is careful with his money, Youngest has a hard time keeping it in his pants pocket...his wallet that is. I guess we don't actually have to give them a card though.

I don't suppose frat fees count? They do say they will ding your credit if you don't pay on time, so hopefully his paying them is a plus. I will have him ask about that.

IP

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Author: PSUEngineer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126764 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 4:08 PM
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Thanks Dave. My two cards are already joint with DH, can you put a third person on? I don't mind letting Eldest simply build credit over time. We have to be careful to do for him what we are willing to do for his brother. While Eldest is careful with his money, Youngest has a hard time keeping it in his pants pocket...his wallet that is. I guess we don't actually have to give them a card though.

I just opt to let my kids build their own credit over time than having any joint cards with them.

PSU

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126765 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 4:34 PM
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I just opt to let my kids build their own credit over time than having any joint cards with them.

I co-signed for a credit card for each of them in high school so that they could learn how to use a credit card while they were home, so they could build their own credit rating, and so I could have them pay for things that were my expenses (groceries, medical expenses, etc.) without having to give them cash.

I do not like the idea of adding them to several of my credit cards. I'd rather they learn how to handle a credit card on their own, and earn their own credit rating based on their own good habits.

It must have worked. Now that they finished school back in May and are gainfully employed, they have each already applied for and received their own credit cards with what I consider a pretty high limit.

I have asked them to keep the card we have jointly so that I have a convenient way to pay for things that I might want to get for them, or for expenses that really belong to me. For instance, DD still lives at home, and I can just send her a text to stop and pick up some groceries on the way home, and then just pay her card directly. Or when someone is having a reason to celebrate or needs some cheering up, I can tell them to take themselves out to dinner on my nickel. That is something I learned from someone here, and I thought it was a great idea.

Our credit union provides monthly FICO scores, and my kids have each had great credit ratings since high school with only that one joint credit card. Neither of them has student loans or car loans (they each bought their first car used with cash), so their score is just a product of that credit card, paying it on time, and not charging it up to use a huge percentage of their credit.

I hope the only loan they will ever need is a mortgage, and a car loan only in the case where it makes more financial sense but not because that's the only way they could buy the car.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126766 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 4:56 PM
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I just opt to let my kids build their own credit over time than having any joint cards with them.

Kinda hard to do. Even making $1,000/week on internship he needed a cosigner for a $1K limit mastercard, because he didn't have a credit history. He's heading to Spain for semester abroad, and I sure would feel a whole lot better if he had a CC with a significant credit limit.

I trust this kid enough to hand over his UTMA for his control two years before I actually have to. He is a future CEO. We've known that since he was 5. Youngest, not so much. Amazing how different two kids can be from the same household.

IP

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126767 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 5:49 PM
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Hi IP,

Thanks Dave.
Sure.

My two cards are already joint with DH, can you put a third person on?
It's the bank's discretion... ask them. I've heard of them adding a 3rd plenty of times.

I don't suppose frat fees count?
Only if they report to the bureaus ever billing cycle, not just on default.

Cheers,
Dave Donhoff
Leverage Planner

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Author: PSUEngineer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126768 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 6:35 PM
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Kinda hard to do. Even making $1,000/week on internship he needed a cosigner for a $1K limit mastercard, because he didn't have a credit history.

Maybe with the particular CC issuer that he was using. It may just take some searching for one that would.

PSU

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Author: Raladic Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126769 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 6:53 PM
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Kinda hard to do. Even making $1,000/week on internship he needed a cosigner for a $1K limit mastercard, because he didn't have a credit history. He's heading to Spain for semester abroad, and I sure would feel a whole lot better if he had a CC with a significant credit limit.


Most of Europe runs of debit cards, so he's probably best off opening a local bank account for while he's abroad.
That way you can also save on foreign transaction fees (unless you're thinking of a card that features no such fee, but then the transfer spread may be bigger).

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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126770 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 7:19 PM
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That way you can also save on foreign transaction fees (unless you're thinking of a card that features no such fee, but then the transfer spread may be bigger).
FWIW - I remember ~20 years ago that it was a good idea to use Visa/MC - they would usually have the best exchange rate. But I know it wasn't as good of an exchange rate using credit card when I was in over there ~10 years ago. The exchange kiosk in the airport was actually a better deal. :(
He may have some difficulty opening an account there - he may want to research it before he leaves.

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126771 of 127680
Subject: Re: College Student's Credit Rating Date: 1/23/2014 9:34 PM
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Most of Europe runs of debit cards, so he's probably best off opening a local bank account for while he's abroad.
That way you can also save on foreign transaction fees (unless you're thinking of a card that features no such fee, but then the transfer spread may be bigger).


DD used a CapitalOne Visa and a CapitalOne banking account while she was studying abroad for a semester in Italy. She was able to use her credit card most places, and did ATM withdrawals in local currency for when she needed cash. CapitalOne does not charge foreign transaction fees on their credit card nor do they charge ATM fees, so this was the best bet for her.

As I recall, I co-signed on that credit card, but she has just closed that one when she got her own CapitalOne card instead because they have a great cash rebate. She still has her initial credit union credit card, which is the one I also co-signed and which she will keep for my convenience and to keep her oldest card active.

She did not have any problem without a debit card while in Europe, but it is worth checking to be sure that is still true. She was there in 2012.

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Author: CCinOC Big funky green star, 20000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 126773 of 127680
Subject: Re: College Student's Credit Rating Date: 1/24/2014 12:23 PM
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A "secured" credit card doesn't require past good credit to get it and builds good credit through use.

https://www.bankofamerica.com/credit-cards/education/build-c...

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