Q When my daughter was in college she decided to not get a credit card. Instead, she used a debit card throughout college, in part to help assure that she did not overspend. Now she has graduated from college with no credit card debt but also with no credit record. It seems students get card offers but graduates do not. How does she get a credit card so she can build a credit score?
DONN, ROSEVILLE
A First of all, I think it's smart for undergraduates to use debit cards rather than credit cards. Far too many students have graduated with the burden of meeting monthly credit card debt even before they start repaying their student loans. The financial pain of paying off debt has gone up over the past decade for young college graduates, too. The real earnings of college graduates (ages 24-35 with a bachelor's degree only) are down 11 percent since 2000, and jobs have been scarce during the Great Recession.
Your daughter's experience is one reason why it's usually a smart move for a college senior to get a credit card. It's simply much easier to get one in college when you're not earning an income than when you graduate with a degree and start making money. Go figure!
She doesn't want to make too many credit applications. The reason? The more she's denied credit the higher the odds that the next lender will say no. She may also have to accept a higher-cost credit card at first.
The first thing I would do is apply for a card at her credit union or bank. If she's working and hasn't bounced checks, she could get approved for one with a small credit limit. She also might consider opening up an account at a credit union. A number of credit unions in the area offer no-fee credit cards. The interest rate is less important if she doesn't carry a balance, which I hope she won't.
If that doesn't work, there are a number of other techniques to consider. A classic is to get a gas company card. It's usually easier to get than a traditional unsecured card. Problem is, they are high-fee, high-interest-rate cards. The basic idea is for her to use it for a brief time to establish a credit history. She should then qualify for a no-fee (or at least a low-fee) card and dump the gas card. You could allow your daughter to build her credit history by tapping into yours. You could add her to your credit card as a joint holder or you could cosign on her card application. Of course, then you're on the hook for her borrowing habits (as she is for yours).
My final suggestion is she could take out a "secured" credit card. She'll open up a special savings account with a bank that issues the card. Her credit limit is equal to or somewhat less than the amount on deposit. She'll make some interest off her security deposit. Eventually, after showing a pattern of paying off her bills on time, she'll be able to switch to a traditional unsecured card.
