Okay, here's the deal: my son was trying to get credit for a motorcycle, but he didn't have credit established. Many people suggested getting a store credit card (Walmart, Sears, etc) with a low limit, and paying it on time every month to establish a credit history. Sounds simple, but he is getting denied even a store credit card! So does he establish a credit history if he can't even get his foot in the door credit-wise? He thinks maybe he has been a victim of "identity threat" and somembody has ruined credit in his name. Any thoughts?
[Skip to the last paragraph for the short answer. Understand all advice in this thread is just from someone who's good with money, but isn't a certified financial advisor.] Five years ago I could've given you some useful advice, but my information has probably been outdated by recent laws. Back when I was in my late teens/early 20s, the hands-down, no brainer time to get credit was when you were a college freshman. For reasons that are too complex to go into right now, lenders believed in giving new college kids the opportunity to establish a credit history. Then the trick was to be very careful with your credit and that set you up for life. Unfortunately, apparently most people weren't "very careful" to use credit responsibly and that not only fucked things up for them, it fucked things up for everyone after them. This all came to a head when they pushed through "credit reform" laws to "protect" us from eeevil financial institutions. The problem was that these laws constrained the risk/reward equation used in extending credit with the unintended consequence that lenders won't give anyone credit anymore. But I'm rambling. I'm no financial advisor and I'm not up on the latest trends, but your son should probably get a free copy of his credit report if he hasn't already. That'll turn up any identity theft issues. After that, one option might be getting and using a prepaid "credit" card to build credit. Another option might be to find one of these predatory lenders that will sell you a computer or something on installment. Yes, they'll likely rape the shit out of him on interest rates and charges, so I'd definitely talk to someone who knows more about this sort of thing than I do to see if that would actually help or just cost him a bunch of money. Oh. If you have a small-town bank or credit union you've had a long-term relationship with, that could help as well. 6-7 years ago my then-68 year old mother finally needed her first credit card. You couldn't reserve a hotel room or rent a car or a bunch of other things without a credit card, so she finally bent to it and resolved to get one. The problem was that she had no credit history. I don't know if the first house had been in my dad's name. I think they actually did a loan through my grandparents or something. But in spite of being a senior citizen with a fairly secure lifestyle, she couldn't get anyone to give her a credit card. Finally, one of the little local banks (town with a population of 2000) has one of my cousins that works at it. When I was running a paintball business I had my business account through them. And I think my Mom had an account through them. The bank knows my mom has a history of being fiscally responsible--they even know she has money in her account--and since she's dealing with people, not an institution, she was able to get a credit card. Of course after that she was swamped with credit card offers. But that's another story. Actually, as I'm typing this, that's something to look into. Google "secured credit card." That could be just what you're looking for. You open an account with a bank and because your account balance is linked to your credit card, there's very little risk for them. That might be the road to building credit for your son.
Definitely get a credit card with your son's bank (that's what I did). I used to get denied for store cards and everything due to my lack of a credit history, but now it seems like everybody wants to give me a card.
Yes we will do this over the phone (get free credit report) when he gets off work. We don't have a printer - it says don't apply online if you can't print, because if you screw it up you're only allowed one request per year. As for the "secured bank credit card" linked to my bank, I'm not clear. My son gets a credit card through his bank, or he gets one through my bank? I'm totally confused about this - please explain.
Through his bank; if he has a debit account with a couple grand they should approve him with a modest credit limit.
So first he needs to build up some savings (in his account) and then get a bank credit card? So how does the bank credit card differ from his bank debit card? In other words, isn't he just borrowing his own money? OR does the money in his savings work as collatoral?
Basically it's collateral. Obviously it's a bad idea to loan money to somebody with no credit history and nothing to fall back on! The difference is that when you're paying debit (from a checking account), well, you pay immediately, whereas with credit you're given a bill at the end of the month with the option of paying in full, making a minimum payment, or whatever (just like any other credit card). If your son doesn't have any savings, you could loan him some capital to create that illusion while he applies; it's not like they'll take his account away after giving it to him. You can keep borrowing even when your debit account is emptied out, but I wouldn't recommend it.
I came to the US with no credit rating. Not a "bad" credit rating, no rating at all. This is a disaster as far as getting credit is concerned. I tried getting a cosigner for a car loan, but the only way I could get approved was if I was taken off the loan listing completely! This was not going to be much use in building my credit. What I did was join the local credit union and used their "first-time car-buyer" loan package. They gave me 11% and ignored the state of my credit rating completely. Not ideal, but it got me started. Within six months my credit was good enough for me to get a standard credit card from them.
My first credit card was a Gulf oil gas card, yeah I know I'm old. But if he could get a gas card that would establish credit and if it is only used for gas, that would limit his temptation to overspend.
Man. When I turned 18 I couldn't stop getting credit card offers in the mail. I can't remember if I finally signed up for one or if I got one through the bank, but it is the shittiest interest rate imaginable and I don't use it.
I got my first one through the bank. Spent most of high school establishing a credit history. Now I have a good rating, and a very high limit. I could have used debit like everyone else, but I used the credit card instead. Either way I paid my bills.
