How to help your college-age child establish credit
Ask The Credit Guy
Dear Credit Guy,
My daughter is trying to get a credit card while she is in college. She is not sure how she can be sure some card companies are legitimate online. After applying for a card, the company sent her a letter requesting an original copy of her phone bill and a letter from the school to prove she is enrolled. Is this protocol for companies giving credit to students? -- Dorothy
Establishing credit is a good idea for your daughter and a credit card is a good place to start. In addition to establishing her credit, I would encourage your daughter to also plan how she will be using her new credit card. Many students who receive their first cards while in college and when they have a limited income end up with debt that is more than they can pay. A workable plan can help your daughter avoid unwanted debt.
Before we get to the plan, let me answer your question regarding legitimate card offers online. I suggest that your daughter shop for the card that is best for her through a reputable online site such as CreditCards.com. websites such as these will only link to credit card companies that have proven customer service reliability and satisfaction.
As far as the request for a copy of a phone bill and proof of enrollment in school, these seem like legitimate requests to me. If either of them contains information you don't wish the company to have, just block out that information. Each card company will have their own criteria for card offers and requirements for application.
I am certain that your daughter will be able to secure a credit card that is right for her needs. Now, I'd like to get back to the plan she will need to have in place once she receives her card.
It is likely that your daughter will have a small income while she is attending college. She needs to keep her income in mind when considering using her credit card. A good rule of thumb for someone in your daughter's position is to never charge anything consumable. In other words, if she doesn't have money for pizza, the expense should not be charged to her credit card. Continuing to pay for pizza one ate more than a year ago can be quite depressing.
Those items for which she may need to use her card include things like textbooks, a new tire for her car or other essentials. She should have a plan in place to pay off any of these types of charges within 90 days. To accomplish this goal, she will need to budget her income to include the credit card payments.
One way that you as a parent can help your daughter control her spending on her credit card is to discuss what an "essential" item is and when it is appropriate to borrow money to purchase such an item. Many of the problems with first credit cards can be avoided with some preventive education beforehand by an older and wiser user of credit.
Take care of your credit!
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
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