Author Topic: Credit score with a parent's credit card. Is it worth it?  (Read 4287 times)

nawhite

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Credit score with a parent's credit card. Is it worth it?
« on: December 09, 2013, 12:24:01 PM »
When my wife was 18 her dad added her as a joint owner on one of his credit cards that he had had since before she was born. This was mostly done so that she could use it in an emergency while in college. She used it twice ever. On her credit report, this credit card is listed and the report says that she has a credit history older than she is. Long credit history is good.

Seeing as this credit card appears on our credit report, CreditKarma lets us know exactly how much of a balance is on it (its my FIL's primary card). Unfortunately, my FIL isn't as good at paying his balance off every month and carries a multiple thousand dollar debt. Not paying it off every month is bad.

Over the past year DW and I have been working on improving her credit. The credit card joint owned with her dad and a ton of student loans were the only things she had so her credit wasn't terribly great. Over the past year, she's gotten a rewards credit card, started using it effectively and is smart about always paying it off entirely every month. We've started to see her credit increase dramatically over the past year because of this (and her being named on some bills that are always paid).

We are trying to decide if keeping her listed on the credit card with her father is a good idea. Is the benefit of a credit history older than she is greater than the negative of having a rolling balance of multiple thousands of dollars? If its a wash, we'll likely ask for her to be taken off of the card because she wants to fend for herself now.

(How we gently tell him "we want her off your card because you don't pay your balance" is a different story that we'll figure out when we get to it)

gimp

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #1 on: December 09, 2013, 02:32:16 PM »
I'd say she's old enough to be taken off.

My parents did the same for me (thankfully they paid it every month!) but it's getting near the time where I should get taken off it, too; 23 is old enough!

nawhite

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #2 on: December 09, 2013, 03:28:52 PM »
I'd say she's old enough to be taken off.

I'd agree she's definitely old enough to be taken off, the question is how bad is the credit hit for going from a credit history of 30 years to a credit history of 1 year?

huadpe

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #3 on: December 09, 2013, 04:02:25 PM »
I dunno how easy it'll be to get her off the card if he's running a balance.  She owes that money to the bank, and they may not be inclined to just let her off the hook for it.

Janie

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #4 on: December 10, 2013, 07:46:39 AM »
I'm not clear if he's carrying a balance while continuing to make monthly on-time payments or if he's skipping or making late payments (which is worse, obviously). Either way, she should feel free to say, "Thanks Dad, but I don't need to be on your card anymore." Why not just thank him and present dropping the card as a step toward independence? No need for it to get negative.

Length of credit history is only one factor that makes up FICO score. Payment history is more important. Ideally, one should keep credit utilization to 30% or less of the total available. (Having cards near the max will drop rating.) Bottom line, time will fix the length of credit history anyway. Here's how FICO scores are calculated:  http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Lastly, I wouldn't take Credit Karma too seriously. It can be off considerably from your actual FICO score.
« Last Edit: December 10, 2013, 07:48:24 AM by Janie »

willn

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #5 on: December 10, 2013, 07:57:11 AM »
I dunno how easy it'll be to get her off the card if he's running a balance.  She owes that money to the bank, and they may not be inclined to just let her off the hook for it.

Wow, is she a joint owner? Or authorized user? 

If she's a joint owner I'd be having a conversation with dad.  Time to set some boundaries.

I wouldn't worry a bit about getting off it affecting her credit. If she is an owner on the card she's in a risky spot---based on the dad's dubious financial knowledge I'm not trusting him with my credit score.



huadpe

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #6 on: December 10, 2013, 09:58:55 AM »
I dunno how easy it'll be to get her off the card if he's running a balance.  She owes that money to the bank, and they may not be inclined to just let her off the hook for it.

Wow, is she a joint owner? Or authorized user? 

If she's a joint owner I'd be having a conversation with dad.  Time to set some boundaries.

I wouldn't worry a bit about getting off it affecting her credit. If she is an owner on the card she's in a risky spot---based on the dad's dubious financial knowledge I'm not trusting him with my credit score.

Does being an authorized user get you anything on your credit report/score?  It doesn't seem like it should - since you're not responsible for the payments and you're not actually borrowing any money.

gimp

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #7 on: December 10, 2013, 10:36:33 AM »
Does being an authorized user get you anything on your credit report/score?  It doesn't seem like it should - since you're not responsible for the payments and you're not actually borrowing any money.

Pretty sure it does. That's what I was when I turned 16 or whatever. Don't quote me on it...

mlipps

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #8 on: December 10, 2013, 12:20:47 PM »
I'd keep it for now and take it off if you ever want to apply for a mortgage in her name. That's really the only time it will really hurt your credit history enough to matter. If her credit was good enough to get approved for a rewards credit card, you're probably fine. It can't hurt to leave it there in case you want to apply for other credit cards etc. However, if you go to apply for a mortgage, it could hurt your DTI ratio on an overall basis or on a monthly payment basis, so I would get it removed in that instance. In the meantime, you can keep building her own credit by letting her average age of accounts independent of her dad's card improve.

dragoncar

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #9 on: December 10, 2013, 12:27:36 PM »
I'm not clear if he's carrying a balance while continuing to make monthly on-time payments or if he's skipping or making late payments (which is worse, obviously). Either way, she should feel free to say, "Thanks Dad, but I don't need to be on your card anymore." Why not just thank him and present dropping the card as a step toward independence? No need for it to get negative.

Length of credit history is only one factor that makes up FICO score. Payment history is more important. Ideally, one should keep credit utilization to 30% or less of the total available. (Having cards near the max will drop rating.) Bottom line, time will fix the length of credit history anyway. Here's how FICO scores are calculated:  http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Lastly, I wouldn't take Credit Karma too seriously. It can be off considerably from your actual FICO score.

Credit Karma should report if there are late payments.  Or grab her free credit report from http://www.annualcreditreport.com/ (I know this link looks spammy but it is the for real government-sponsored free credit report site).  You will see if there are late payments there.

If there are no late payments and credit utilization isn't high (maxing out the card) then I say keep it on there.  If there are late payments or high utilization, bail.

She's probably an authorized user and not directly responsible for the balance (although of course I don't know for sure).  I had a similar situation and I think having the card on my report helped me for a long time.  It recently fell off my report probably because I hadn't held the physical card in like 15 years and they gave up.

willn

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #10 on: December 10, 2013, 12:36:53 PM »
I'd keep it for now and take it off if you ever want to apply for a mortgage in her name. That's really the only time it will really hurt your credit history enough to matter

If something happens to Dad, then she's liable for the debt in its entirety as a joint owner.  Respectfully, I put this arrangement in the 'unnecessary, and bad idea' column.


nawhite

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Re: Credit score with a parent's credit card. Is it worth it?
« Reply #11 on: December 10, 2013, 12:47:13 PM »
I guess it is possible she is an authorized user and not a joint owner. I just thought that it wouldn't appear on her report if she was just an authorized user, but I could very well be wrong.

Thanks for all the good advice. We got a mortgage in my name only about 6 months ago so I'm not too worried about her needing a score any time soon (unless rates decide to dip again). The reason we started trying to improve her credit score was because the banks weren't giving us as good a rate when we tried to get a mortgage jointly.

I think we'll end up taking her off and at the same time, take her dad off as a co-signer on her student loans (just learned that we could do that after 2 years). Full separation seems like the best plan for us.