I've been blown away by your responses to the new Ask the Readers feature, especially to yesterday's question about what do do if you have no credit history. Here's a story Derek e-mailed me about his first-hand experience safely building his credit score.
I am a college student, and I have a credit card. My parents and I have worked out a system for protecting me from possible credit card debt. Our system only worked because both my parents and I are very careful financially, but I think it might be useful to others out there, perhaps to parents with a son or daughter about to enter college.
The credit card was mine, and I could do whatever I wanted with it, but the bills were mailed to my parents' house. Every month, they would pay the bill on time and in full, and then I would be responsible for reimbursing them.
This had several advantages.
- It allowed me to build up a perfect credit history, which will be useful down the road.
- It protected me from credit card debt — even if I had made a mistake in my spending, my credit limit as a college student is low enough that my parents would still have been able to pay the bill in full. I would of course have had to deal with very angry parents, but my credit score would not have been impacted, and I would not have gone into debt.
- Even though my address changed frequently because of holidays and moving to new residences, I never had to worry about changing my address with the credit card company because the bills were always sent to my parents' house.
- If my parents agreed to pay for something I needed, such as school supplies or food, I could simply charge it to the credit card, and they would in turn agree that I didn't have to pay them back for that portion of the bill.
I will graduate next semester, and without the safety net my parents provided, I have canceled my credit card, even though I was always able to use it responsibly. This was a good way for me to go into the “real world” with a perfect credit report, which I am sure will turn out to be a great asset.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.