Your credit score is important in so many facets of your life. This is so true yet no one teaches its importance not even business schools.
If you want to help your child by buying a rental while they are attending college, it is advantageous to buy the unit as owner occupied by your child with you as a non-occupant co-borrower. This is especially helpful when you buy near a college campus and the owner occupancy is below 50%. On an owner occupied purchase, you do not need to concern yourself with the owner occupancy. Your child does not have to have any income and the only stipulation is that you child have a respectable credit score
The credit score is also critical when buying a car, renting an apartment, getting phone and utility service and even applying for a job.
In the past, you could get a credit card at the age of 16. Currently you cannot get a credit card as an individual until you are 18 years old.
The trick is to get a card in both you and your child’s name. DO NOT add the child as an authorized user but have them jointly be on the card with you. Make sure that you differentiate between the two and make sure that they are liable for the card.
You do not need to give them the card as you can use the card, as you are a joint owner on the card. I personally suggest giving the card to your child as they need to develop self-control and responsibility and you have the ability to monitor their usage.
When they turn 18, have them apply for a second card and by the time they are 20 they should be set with a respectable credit score.
The credit history is also important in the event that they move or have a medical expense that is missed inadvertently because of a move or other oversight. With an established credit history, the derogatory will have less impact on their score.
With the higher score and as their spending increase they are in a position to apply for an airline or other awards card.
Senior Loan Officer NMLS#309188