Beating Broke

Personal Finance from the Broke Perspective

Help Your College Student By Adding Them as an Authorized User to Your Credit Card

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I got my first credit card when I was in college.  At first I was responsible, but then I began to charge more than I could afford on my meager student salary.  I still remember the first purchase I made on my credit card that I knew I could not pay off immediately—a $37 tennis racket because my friend and I wanted to play tennis that summer.

Unfortunately, that lead to a habit of over charging because I had very little income coming in.  My experience is not unique.  Approximately 90% of undergraduate and graduate students who have credit cards carry a balance each month (Debt.org).

Boost a Student's Credit Score
Boost Student’s Credit Score

If you’d like to help your teen or college student develop a responsible credit pattern as well as a good credit score, the secret may not be to get him his own credit card, but instead to make him an authorized user on your account.

As an authorized user, she’ll be able to use your card.  You can either pay what she charges or have her pay what she charges.  In addition, you’ll be able to keep an eye on her purchases and make sure she is using her privileges responsibly.  This can get her into the habit of responsible credit card use so she can avoid debt in the future when she has her own card.

A Few Caveats

Before you pursue putting your child on your account as an authorized user, you’ll want to cover a few bases:

Have a Strong Credit Score

If you add your child as an authorized user to your account, she will “inherit” your credit score.  If you have a high credit score (generally 700 or above), you will be giving your child quite a gift.  With a high credit score, when she finishes college, she’ll more easily be able to rent an apartment and get her own credit card later in life.

If your credit score is low, you’ll be saddling her with an obstacle to overcome.  It’s better for her to have no credit score than to inherit your low credit score.

Choose a Card that Reports Authorized Users to the Credit Bureaus

Not all credit cards report authorized users to the credit bureaus, which means your child won’t get your credit score.  In general, the major credit cards do, while credit unions may not.  To be sure before you add your child, confirm with the credit card company that they will report authorized users.

Only Do This With Responsible Children

Since you are ultimately required to pay any expenses put on your credit card by your child, only put a child who is financially responsible on your card as an authorized user.  If your child has been irresponsible financially in the past, there is no use in tempting him with your line of credit.

See If There Is a Fee for Authorized Users

Finally, keep in mind that some credit cards charge a fee to add an authorized user.  You’ll want to verify this is not the case for your particular card before you add your child.

If you’d like to help your child develop financial maturity and secure a good credit score, consider adding him as an authorized user.

Have you added a child as an authorized user or were you added as one?  If so, what was your experience?  Would you recommend doing this?

 

How To Give Your Credit Score A Makeover in 90 Days or Less

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If you want to get ahead financially, good credit can be a huge help. Lenders may be more inclined to give you a car loan or a home loan at a great rate when you’ve got a strong financial history. But how do you build better credit? And how long does it take?

Surprisingly, not as long as you might think. It all comes down to planning. If you’re wondering how to improve your credit score — and do it quickly — these tips can help.

Know your score

First things first, get your free credit score so you know where you’re starting from and how many points you’ll have to make up to reach your target score. For example, if your score is 650 and you want to raise it to 700, that’s a 50-point gap you’ve got to cover.

Check your score but also check your credit report. Your credit report includes all the information that’s used to generate your score, including your payment history, how much of your available credit you’re using, the age of your credit accounts, the types of credit you’re using and how often you apply for new credit.

Two things, your payment history and credit usage, have the biggest impact on your score. If you have late payments on your credit or high balances on your credit cards, those are two trouble spots you’ll need to work on right away if you want to fix your credit fast.

Target one debt

Credit usage just means how much of your available credit you’re using. The closer you are to your credit limits on your credit limits, the worse that is for your score. Paying one of your cards off, or paying down a significant chunk of what you owe, could trigger a quick credit score turnaround.

Pick the card with the balance that’s closest to your credit limit. Or, you can pick a card that has the lowest balance overall if you think you can pay it off in just a few months. The goal is to widen the gap between what you owe and your total credit line as much as possible.

There is an alternative way to do this. You could ask your credit card company to raise your credit limit, or you could open up a brand-new credit card account. Remember, though, that applying for new credit can ding your score by a few points.

Get caught up on past due payments

Paying your bills on time is the most important thing you can do to help your credit score. If you’ve fallen behind on any of your credit cards, loans or medical bills, getting paid up should be at the top of your to-do list. Once you’ve done that, focus on paying your bills on time each month going forward.

Automating your payments from your bank account is an easy way to do this. You could also set up payment alerts to keep track. Either way, the fewer late or missed payments on your credit, the better for your credit score in the long run.

If you are reading this and really, really want to improve your credit you have options.  One choice you could consider is something called tradelines.  What is a tradeline?  The term refers to the accounts listed on a credit report.  A tradeline is basically when you become an authorized user on someone else’s credit account.   And, yes can buy tradelines.   There are companies that will  help you.  You can also ask a friend or relative to add you to one of their accounts.

Poor Credit Score: How are you Really Affected?

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This post in Collaboration with Debbie Fletcher

‘I’m not a number, I’m a free man’ so goes the classic line of the iconic 1960s BBC television series The Prisoner. Yet, in many respects that’s not true. These days you are defined – at least financially – by a number and it’s your credit score (especially if it’s a poor credit score).

This figure – barely understood by most people outside of the world of finance – can have a massive impact on your life, maybe even without you knowing what it is.

It’s important not to dismiss this as just another bit of jargon (there’s plenty of it in the world of finance after all). If you need convincing, they why not consider the issues that you might face as a result of a poor credit score?

Access to money

The most obvious issue facing you if you have a poor credit score comes with your ability to be able to afford big ticket purchases. Whether it’s a house, a car, a holiday or an emergency repair – life has a bit of throwing up key purchases that cannot be paid for upfront.

We are now a nation of borrowers as a result – but our ability to borrow can be severely hampered by a bad credit score.

The ‘score’ itself refers to a calculation given by a credit scoring agency (there are three in the UK and three in the US). It’s effectively a measure of your borrowing ability and you’ll be marked down for missed payments or debts that you have been unable to pay off.

The number will determine whether a lender will give you money in the first place. They want assurance that you are likely to pay them back and this is the way in which they’ll get their assurance. It might also dictate how much you can borrow and the interest rate you will be charged.

So, put simply, a bad credit rating will mean that you can get less money, will be charged more for the privilege of borrowing that money or even that you are just turned down in the first place. That means that house, car, holiday or home repair could be an awful lot more of a problem for you.

Jobs

It isn’t all about the money that you borrow, however. Your score could also impact upon your ability to earn too. Employers are able to run a credit check on the people who apply to them for a job. This check is about ensuring the candidate has a sound record and can be trusted – but you could feel like this is a crude way to do this, as you might not have chance to offer any explanation by way of context.

Does one missed loan payment five years ago or a dispute with an old mobile phone contract deserve to define you in the eyes of employers? Whether you think this is fair or not, it might well be the case.

Emotional

Then, of course, there’s the emotional aspect to all of this. A bad credit score might hang over you. There are steps you can take to improve your credit rating, but this might well take time and mean that big life choices have to be put on hold for a while. Do you really want to be forced to delay moving into your first home with a partner for a few years while you sort out your credit rating?

During those years you might feel under a great deal of stress and strain and some people might well feel embarrassed about what they consider to be a ‘black mark’ against them. We might be a nation of borrowers, but we’re not a nation that is terribly good at talking about borrowing and money. Indeed, our personal finances are still seen as something of a taboo by many people and that can cause people to bottle up their concerns or bury their head in the sand when they encounter trouble.

A poor credit score can, therefore, stop you buying the things you need, harm your chances of getting a good job and impact upon your mental health. When you put it like that, the importance of a good credit score becomes pretty clear.