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Question for the Money Doctors

Question submitted on Dec 28, 2021.

Question

My daughter has a small student loan that goes into repayment status soon. A direct subsidized loan of $7300 is the total I have the money to pay it off in full? However, the intent of accepting the loan was to start the repayment and pay off within a few months to solely start her "credit Report." Will the student loan even be reported on her credit report or should i just pay off and go about her establishing credit via her first credit card?
Also, i only want to make auto-payments on the loan with about 4-5 payments paying the debt off. Is that too short of a time to make an impact?

Answer

Unfortunately, most of the time that student loan will not appear unless it’s negative, there's a late payment, or no payment.

If you’re looking at improving her credit score, you can add her to your score if you have a high score. When you get the credit card you can cut it up and throw it away. She’ll never be seeing it so you won’t have to worry that she can rack up bills that you owe. She’ll see that show up on her credit card, but will only see a couple of the digits of the card, she will not have the expiration date, and she will not have the security code on the back. If you trust her, you can give her the card and tell her it’s only to be used as an emergency card.

Every credit bureau is required to give her a free copy of her credit report once a year annually. During Covid, the federal government change the rules and forced them to give it to people on a weekly basis if the people wanted to see it. I don’t know if this is still in fact, but know it only last a certain period.

I would have her apply for a Fingerhut credit card, buy something small and pay the charge off immediately and let the account sit there. You can also see a list of cards that are easy to get by searching the internet.

Another way is to open was called a secured card. It works just like a bank account debit card. She sends them $500, she can use it to buy gas, or buy groceries, and when she gets the bill she repays it. It’s her money but that does go to the credit report and she does get the credit for timely payments or even paying off the balance ahead of time.

If you have any questions please reach back to me.


For additional information visit //www.360financialliteracy.org/

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