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 Post subject: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 9:31 am 

Joined: Mon Nov 26, 2012 10:18 am
Posts: 30
I posted about my 18 year old trying to establish credit and the question came up of why an 18 year old needs to establish credit. That left me with a lot of questions that I'd like to know other people's opinion on.

When do you think someone should start establishing credit?

How long does it take to establish a credit history?

Say you decide to finance a vehicle and you have no credit? How long will it take
to establish enough a of a credit history to get an auto loan with a decent rate?

How would affect your insurance rates to wait?

Should parents co-sign for kids?

What if your parent has bad credit? Should you pursue your own since they are unlikely to be able to help much?

Thanks is advance!


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 Post subject: Re: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 10:11 am 

Joined: Fri Jun 25, 2010 3:06 pm
Posts: 81
annibe11e wrote:
Should parents co-sign for kids?
No.


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 Post subject: Re: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 10:15 am 

Joined: Fri Nov 30, 2012 1:32 pm
Posts: 9
IMHO you start establishing credit as soon as you start earning an income.

Establishing a good savings history is at least as important, should be the first step, and it will help establish your credit history.

Can't help you with the auto finance question as I believe going into debt for consumer items is counter productive to your financial well being.


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 Post subject: Re: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 10:42 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1120
nelson wrote:
annibe11e wrote:
Should parents co-sign for kids?
No.

Not just no but hell no!!!


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 Post subject: Re: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 8:51 pm 

Joined: Mon Nov 26, 2012 10:18 am
Posts: 30
Love the co-sign answers! Does that go for apartments, too?


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 Post subject: Re: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 9:08 pm 

Joined: Sun May 29, 2011 4:50 am
Posts: 169
annibelle, can you afford to make the payments on the car/apartment lease, etc in whole if your son were to default? That should be one factor in whether to do it or not.


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 Post subject: Re: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 9:27 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1120
annibe11e wrote:
Love the co-sign answers! Does that go for apartments, too?

I've never heard of co-signing a apartment lease without both of you living there but no to that also. If he defaults on the lease in any way then they come after you as well.


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 Post subject: Re: When to start establishing credit?
PostPosted: Tue Dec 18, 2012 9:43 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 273
Location: Atlanta, Georgia
Wow, I'm surprised to hear such hard-line answers as to whether parents should co-sign for their kids. Mine would be "it depends." By the time a kid is 18, his parents should have had many opportunities to observe his work ethic and how responsible he is relative to money management. Did he demonstrate a desire to earn money through work? If so, did he spend it, save it, or some of both and in what proportion? Did he show up to work regularly and on time? How often as an older teenager did he disregard your wishes, especially after you've expressed how important they are to you (and I mean responsibility-wise, like cleaning his room, filling the car with gas, helping with younger siblings, etc., not whether he agrees with personal opinions)? I would be much more inclined to co-sign for my kid if I know him to be responsible and have good judgment, but only through the end of college. And I would do it in limited ways, such as yes to an apartment and possibly yes to a low-limit credit card. No to personal loans, car loans, and multiple credit cards. Also, all of this co-signing business assumes that I am in a financially sound place when it comes time to make the co-signing decision. If parents have their own loans, feel their jobs are at risk, don't have a fully stocked emergency fund, or have other big expenses coming up that they need to save for, then they should be less inclined to make overatures. And that's why I think keeping the co-signing to a manageable amount is an important balance.

A few points on a couple of your other questions: I think people should begin establishing credit somewhere around college-time. If a responsible person with good judgment, possibly earlier. If not particularly responsible, then later. If the parents themselves do not have great credit history, then there is no point in passing that off to the kid -- they are better off beginning to establish credit on their own.

Sorry, I don't know anything about your remaining questions!


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 Post subject: Re: When to start establishing credit?
PostPosted: Wed Dec 19, 2012 10:22 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1592
Location: Seattle, WA
One of the problems with cosigning is that the creditor is under no obligation to inform you if the account (or lease or whatever) goes into arrears. So you might not hear about any problems until it's too late - late fees and penalties have piled up, and your credit is shot.

Still, I have to admit, I would probably co-sign to help my child get started out, unless they are a problem child. But not on a car loan (I'd be more likely to loan them a few thousand of my own money to buy a beater, if I thought it was necessary for them) and not on something overly open ended like a high limit credit card. In the latter case, it would be better to make them an authorized user, because at least then you get the statements. (Though it's not clear to me that authorized usership gives a boost to one's credit report anymore, since it was abused in the past by unscrupulous credit fixers.)

Of course since my child is only 2, by the time she could even have credit, who knows how the rules will have changed. I established credit with a small credit card at age 18 (something that is no longer legal without a cosigner) and student loans.


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 Post subject: Re: When to start establishing credit?
PostPosted: Thu Dec 20, 2012 3:01 pm 

Joined: Fri Jun 25, 2010 3:06 pm
Posts: 81
LeRainDrop wrote:
Wow, I'm surprised to hear such hard-line answers as to whether parents should co-sign for their kids. Mine would be "it depends." By the time a kid is 18, his parents should have had many opportunities to observe his work ethic and how responsible he is relative to money management. Did he demonstrate a desire to earn money through work? If so, did he spend it, save it, or some of both and in what proportion? Did he show up to work regularly and on time?
If they are responsible with money and have a good work ethic, they won't need you to co-sign a loan (or lease) for them. In fact, by not co-signing you're affirming their responsibility and letting them "grow up" normally. By co-signing you're signalling that you think they are still a child and can't be trusted on their own.

On the other hand, if they are irresponsible and therefore "need" you to co-sign then you'll probably just end up with less money and an adult child that will both depend on you and resent you.


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 Post subject: Re: When to start establishing credit?
PostPosted: Thu Dec 20, 2012 5:09 pm 

Joined: Wed May 30, 2012 11:56 am
Posts: 132
nelson wrote:
LeRainDrop wrote:
Wow, I'm surprised to hear such hard-line answers as to whether parents should co-sign for their kids. Mine would be "it depends." By the time a kid is 18, his parents should have had many opportunities to observe his work ethic and how responsible he is relative to money management. Did he demonstrate a desire to earn money through work? If so, did he spend it, save it, or some of both and in what proportion? Did he show up to work regularly and on time?
If they are responsible with money and have a good work ethic, they won't need you to co-sign a loan (or lease) for them. In fact, by not co-signing you're affirming their responsibility and letting them "grow up" normally. By co-signing you're signalling that you think they are still a child and can't be trusted on their own.

On the other hand, if they are irresponsible and therefore "need" you to co-sign then you'll probably just end up with less money and an adult child that will both depend on you and resent you.


My last apartment required a cosigner since I'd been living at my parents and had no recent rental history. At the end of the 6 month lease - the longest they allow for new renters - they let me sign my next lease on my own. I'd been living at my parents because of health issues, not irresponsibility.

Since my mom agreed to cosign for me I was able to move out of the house, pay my own rent, and develop more independence from my parents. My mom only agreed because I had a stable, reliable job and she knew that I'm responsible enough to pay my bills on time.


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 Post subject: Re: When to start establishing credit?
PostPosted: Thu Dec 20, 2012 7:35 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 273
Location: Atlanta, Georgia
catchingup, that's a great example of the sort of situation in which I would be willing to co-sign for my kid. When I was in college, all of the apartment complexes in the area required someone to be on the lease that was at least 25 years old, so basically that meant that all undergraduate students had to have a parent co-sign if they wanted to live off campus. The other situation in which I was thinking of co-signing is not when the kid is irresponsible/bad credit, but rather when they have no "credit history" but have been otherwise responsible with cash, jobs, siblings, etc. In any event, my answers on what I would co-sign are still hypothetical because I don't have any kids yet! :)


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 Post subject: Re: When to start establishing credit?
PostPosted: Fri Dec 21, 2012 2:58 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1592
Location: Seattle, WA
Due to the CARD Act, 18 year olds are required to have a cosigner to get a credit card. That's how I built my credit history, and it's an option that's not available to today's 18 year olds, without that co-signer.


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 Post subject: Re: When to start establishing credit?
PostPosted: Sat Dec 22, 2012 12:03 am 

Joined: Sun May 29, 2011 4:50 am
Posts: 169
stannius wrote:
Due to the CARD Act, 18 year olds are required to have a cosigner to get a credit card. That's how I built my credit history, and it's an option that's not available to today's 18 year olds, without that co-signer.


They're only required to have a cosigner if they don't have proof of income. Makes sense. Call me crazy but I think credit should be established in tandem with the income to pay for it.


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