Credit Rating

May 19, 2011 5:37 PM

I have a friend who is 22 years old, has a part-time job, and wants to begin establishing his credit rating. He has a checking account but is having trouble getting a credit card with no annual fee due to his low income at this time. He is very money smart and will be using this card to establish credit, he plans on paying the statement in full every month. Is there any credit cards out there that he could apply for that would accept him with his low income? If his mother did add him to her credit card account would it build HIS credit rating?
posted by sandyp to Work & Money (22 answers total)

I originally built credit by getting a card with my mom that I used occasionally.
posted by J. Wilson at 5:45 PM on May 19, 2011

My first credit cards were the ones you could only use at one store: Sears, Fashion Bug, Old Navy etc. I've found they are more likely to give you credit because it's not as risky for them because you can't get cash advances with their cards, you can only buy the stuff that store sells.
posted by NoraCharles at 5:53 PM on May 19, 2011 [2 favorites]

Best answer: He could get a secured credit card which requires an upfront deposit that's equal to the credit limit - usually $300 or more. In typical circumstances where you have no credit issues, this will become a regular credit card in a year or so and you get the deposit back.
posted by GuyZero at 5:53 PM on May 19, 2011 [5 favorites]

He could get a card with an annual fee and then transfer the balance to one without a fee in 6 months - a year when his credit is established enough to get one without a fee. Worked for my husband.
posted by moojoose at 5:55 PM on May 19, 2011

Go to a department or big-box store and sign up for their branded credit card. They don't tend to turn away much of anyone.
posted by valkyryn at 5:57 PM on May 19, 2011

He could also buy something on time. It would give him a credit history.
posted by Kirth Gerson at 6:01 PM on May 19, 2011

Try those department store cards, like Sears Master Card.
posted by WizKid at 6:19 PM on May 19, 2011

If his mother did add him to her credit card account would it build HIS credit rating?

No. FICO only counts the primary holder of a card for impact on a credit score.
posted by VikingSword at 6:23 PM on May 19, 2011

Sorry, I just checked, and it appears that the info I gave is outdated.

Here's the correct info:

"Piggybacking lives. Consumers who have good credit will continue to be able to boost others' credit scores by adding them as authorized users on credit card accounts through a practice known as "piggybacking."

Fair Isaac Corp., creator of the well-known FICO credit score, had announced last year it would end the practice due to abuses, but during Congressional testimony Tuesday, acknowledged it had changed its mind. A company official broke the news during a House Financial Services Subcommittee on Oversight and Investigations hearing entitled "What Borrowers Need to Know about Credit Scoring Models and Credit Scores."

"After consulting with the Federal Reserve Board and the Federal Trade Commission earlier this year, Fair Isaac has decided to include consideration of authorized user trade lines present on the credit report" in a revamped version of the credit score formula called FICO 08, Thomas J. Quinn, Fair Isaac's vice president of scoring solutions, said in prepared testimony. "Our scientists have devised a method to consider these trade lines while materially reducing the negative impact that could arise from piggybacking."

Evolution of piggybacking
Fair Isaac had previously announced that its FICO 08 scoring model would bar piggybacking. The technique enables consumers with no credit and those with poor credit to benefit from being added to the accounts of credit cardholders with good or excellent credit."
posted by VikingSword at 6:27 PM on May 19, 2011

Try opening a checking account at a local credit union and see if you can get a card there with a low limit. It worked for me when I was 18 and partially employed.
posted by Brian Puccio at 6:33 PM on May 19, 2011 [2 favorites]

The conventional wisdom is to apply for a Sears store card because they are very easy to get and do build your credit history.
posted by DarlingBri at 6:40 PM on May 19, 2011

A secured credit card is what your friend wants.
posted by two lights above the sea at 6:50 PM on May 19, 2011 [2 favorites]

Local department store. I had a bad credit score for a long, long time. I was able to turn that around by applying to a local department store's card. They're generally more lenient than the bigger chains. Tell you friend to apply to as many local dept. stores as he can, then if and when he gets the card, make sure he buys something with them. Just a pair of socks or whatever, but when he pays that bill on time, his credit score will improve.
posted by zardoz at 7:14 PM on May 19, 2011

Note that there is a difference between a bad credit history and no credit history. No credit history is worse. I don't know how easy it is to get a Sears card, but when I had no credit history, I couldn't get any store cards. Note that getting refusal on any credit application usually dings your credit rating a very small amount. I'd suggest a secured credit card from a local credit union, then after a year of paying it off every month, try and get it converted to a regular credit card.
posted by Joh at 7:47 PM on May 19, 2011

When I was 16 my parents got a gas-only credit card for me (with my name on it) on their account. I think the limit was $10,000. It was reported on my credit report, and I had to ask to have it taken off when I no longer used it. I don't know that it improved or degraded my credit score but I was never rejected for a credit card application.
posted by IndigoRain at 7:49 PM on May 19, 2011

I had a very similar problem years ago. I couldn't get a real credit card because o had no history. I got a card from Sears. One clothes shopping trip and a few months later I was able to move to a real credit card.
posted by humanfont at 8:52 PM on May 19, 2011

It's my understanding that if he is merely an "authorized user" of someone's credit card, it will not affect his credit score; It is necessary for him to become a "joint account owner" of a card in order for it to affect his score.
posted by Salvor Hardin at 4:40 AM on May 20, 2011

In a similar situation (actually applying for a mortgage and discovering that paying off my student loans meant that I had "no credit history"), the bank manager recommended getting a gas card.
posted by tchemgrrl at 5:56 AM on May 20, 2011

I'm 22, and was in this situation a year ago as an occasionally-employed college student. I got rejected from the Amazon card (which I absolutely coveted) due to not having a credit history. After some more research I applied for and got the Citi Forward Card. No annual fee and the rewards are pretty good too - I just cashed in my "Thank you" points for a discounted flight!
posted by ghostbikes at 7:18 AM on May 20, 2011 [1 favorite]

Suggest that he join a Credit Union that is convenient. They are generally very generous about giving a limited Credit Card that will work perfectly for what your friend is trying to do.
posted by ptm at 7:26 AM on May 20, 2011

Does he still have his official address with his parents? I used to just include my parents' income with mine when the application asked for "household" income. This worked for me, but that was 14 years ago now, so maybe things changed.
posted by parakeetdog at 1:54 PM on May 20, 2011

This is kind of old fashioned but once he joins the Credit Union, he should be able to get a secured loan through them. Basically, they loan you $500 or so and you put up $500 in protected savings or a CD as collateral.

That said, I'd join a credit union and apply for the Sears card. He should talk to his credit union loan manager before applying for the credit union card. No point in getting a "hard" pull on his credit if they aren't likely to approve him.
posted by screamingnotlaughing at 4:42 PM on May 24, 2011