EDITOR’S NOTE: January 24, NJ.com hosts EmpowerU Money: New Year’s Resolutions – a FREE live virtual event. Check out the latest tips on budgeting and saving to reach your goals in 2022! The seats are limited. Register here.
Q. My grandson will be starting college next year. I see on my own credit report that length of time with a line of credit is a factor in the score. What do you suggest he should do to start his credit history? I suggested we get a credit card together, but would he also benefit from the story?
A. It is wonderful that you are trying to help your grandson.
And you’re right. Time is one of many factors in calculating one’s credit score.
The only way to “start” someone’s credit history is to get a loan or other debt account, like a credit card, said Ken Van Leeuwen, certified financial planner at Van Leeuwen & Company in Princeton.
Of course, how the credit card is used, including maintaining a low balance and timely payment, are important factors in helping a cardholder establish a positive payment history and thus establish his credit rating, he said.
If you opened a credit card together, you would both benefit assuming you kept a low balance and made payments on time, he said.
However, the opposite is also true.
“If the card runs out often or if payments are missed or not made on time, it will negatively affect both of your credit scores,” he said.
An alternative to a joint credit card would be to co-sign a credit card in your grandson’s name only, Van Leeuwen said.
“Instead of being a cardholder on the account like you would be with a joint credit card, you vouch for your grandson as the sole account holder and you are responsible for making payments to the card if your grandson was unable to do so,” he said.
Another option would be to add your grandson as Authorized user to one of your credit card accounts. It would benefit from how long you’ve had the card as well as your payment history, assuming it’s good.
Whatever you decide, make sure you both understand the responsibilities and potential risks.
Send your questions to [email protected].
Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.