"Thin File" Poses Challenges to College Students Seeking to Establish Credit...Submitted by Financial Planning Hawaii on September 25th, 2018
"Thin File" Poses Challenges to College Students Seeking to Establish Credit...In the June 2018 issue of this newsletter, I shared some of the financial planning steps we recently took with our oldest son, Noah, upon turning 18. These included establishing (and linking together) an online bank account, automated investment platform, and his first credit card. While he had to jump through a few hoops, such as providing a passport photo and copy of his social security card to get his applications approved, in the end, there were no hiccups. Upon reading my newsletter, a friend had his daughter apply for the same credit card - the Discover Student Card - and reported that she was rejected because she had no credit history.
I am not entirely sure why she was rejected and Noah was not. It may have been because Noah had some wage income for the past few years, but I don't believe income is part of the qualification process. Nonetheless, my friend's daughter's experience is hardly unique. A solution to overcoming the "Thin File" problem often involves first obtaining a credit card with a low maximum balance (e.g., $500-$1,000) through a local bank or credit card that is secured by a cash deposit equivalent to the balance max. For more details, see the following articles –
College Student Declined for First Credit Card (Experian)
When no credit history leads to card rejection (Credit Card.com)
Best Secured Credit Cards (Lendedu.com)
How to Build Credit at 18 (Lendedu.com)
How Long Does It Take to Build Good Credit (Lendedu.com)