Many of us have either: been the culprit, been the victim, or been the witness to an adult opening an account in a child’s name _be it a Macy’s account or a natural gas account_ because the adult’s credit was jacked-up and prevented him/her from doing so in his/her own name. During my interview with financial coach and C.P.A. Shannaan Dawda, for the book How To Raise Your Black Child To Be A Millionaire: Child-rearing Secrets of the Black Elite, he pointed out how this was done to him and that it’s ILLEGAL to do so; a factor that many of us tend to overlook when plotting to employ this tactic.
I was glad Mr. Dawda stressed this point and really explained some key ways to put our children on top by avoiding credit altogether. But, what about the other side of the coin?
Now, I don’t know about you all, but I remember the first time I applied for my own apartment. Even though I was employed, I couldn’t get approved to rent, because I didn’t have any established credit. No matter where I went, I kept running into the same problem and was introduced the trusted cliché, “having no credit is as bad as having bad credit.” So here was the big question that arose for me: “How were these rich or just well-to-do folks who were the same age as me, having never had any financial responsibility getting their own apartments (sometimes houses…swearing that they had gotten financed on their own) and going into luxury car lots and driving off the lots with these vehicles? When I found out, it blew me away!
The short answer is, their parents set them up as AU’s on their accounts. What does that mean, Thiah? Well, that’s the long answer, but I’d be more than happy to share that with you too! Here it goes!
Say you have horrible credit, but you’ve always managed to keep your Macy’s account in good standing with good payment history. You really only use it for school clothes each year but you always make a point to pay it off. On your Macy’s account, you’re allowed, let’s say, five AU’s (authorized users). Let’s take the time to understand what an authorized user is. An authorized user (AU) can use the available credit on your account to make purchases in your absence. Authorized users are generally given their own cards with their names on the account, but you remain the primary account holder and can add or remove those you authorize, at will.
Now there are many reasons why this is powerful information to have, but for the sake of achieving this article’s objective, we will just stick to how this is relevant to your children.
What the credit-wise wealthy do _before their sons and daughters are able to go out and create and ruin a credit history of their own (getting sucked into loans that were never intended to aid in their financial successes)_ is add their children to one or two of their good-standing accounts, as authorized users; allow their credit history with those companies to be reported on their children’s credit reports as their own, boosting their credit scores immensely; then prompt their children to go out and get the most optimal financing or credit lines of their own. Because their scores, at that point, would put them in a position to qualify for A-rated financing, they’d get approved for things that the average person’s child would not; or could with a far steeper interest rate and note. Think of it as the opposite of what would happen if you had an account that you added someone to and they charged it up to the limit. That negative credit conduct would be reported by that credit company on yours and their credit reports. The reverse is true if you have a positive credit history, as well.
So, in the case of your horrible credit _but great Macy’s account history_ you’d be able to employ this same method with your child, setting him/her up to start in a better position than you did. Now, if you’ve been following this blog and paid attention to the advice given in the How To Raise Your Black Child To Be A Millionaire: Child-rearing Secrets of the Black Elite book, your child will maintain that great credit score and not squander the good credit with which you will have empowered them.
For those of you who are a bit old-school (if this is you, you are truly my people), we used to call this “piggy-backing,” back in the day. What the less business astute among us (mostly Black folks born in America) didn’t know was that this method has not only been used for years for people on a personal level, but it’s also been used for new businesses to establish credit lines that would enable them to get the necessary operating capital and supplies to be profitable. That’s a whole other discussion, but it is one that we will undoubtedly have in the future.
It’s important to note here that most of us have thought for years the best and only way to give our children access to greater credit abilities was through co-signing, but most of us also have our own personal experiences of why that isn’t the smartest idea for the co-signer or the co-signee. Perhaps in next week’s article we’ll explain more about what makes this what I like to refer to as stable datum (loose translation…solid info).
Now….if you’re like someone-who-bore-me-but-I-can’t-mention-her-name-because-I’ll-DEFINITELY-get-a-whoopin, then you probably kept your Macy’s account open, but didn’t have a great history that you’d want your child to become victim to. In other words, your history on their report may turn their 500 into a 350….(HA!..a very true exaggeration)! The beautiful thing is that for those of us who don’t have a parent (or anyone within our trusted circle) who has a healthy credit line for us to leverage, there is now a service that is available to those who need the advantages of becoming someone’s AU, without the risk of becoming a victim of fraud or fraudulently acting upon the primary account holder. If you tune into tomorrow’s Raising Black Millionaires Podcast, I’ll share with you my personal experience of getting burned by a fraud and how this service would have prevented that experience, saved me beaucoup money, and boosted my score.
This platform is all about #RaisingBlackMillionaires, but it’s important to note that many of the tools and resources I find for you all (and myself) to use with your children are extremely useful for us to use for ourselves, as well. And sense my job is to connect you with those resources, here is a tool that I’ve found will make a world of difference and help you to become more educated on the way credit works and how to leverage it in a way that RESPONSIBLY yet VERY EASILY can reposition you to more intelligently and effectively leverage credit and get back on top; ultimately becoming free! Here’s a link. http://atlanta.craigslist.org/atl/fns/5734325369.html Be sure to tell them that Thiah sent you; so you expect the Thiah-Sent-Me-Treatment!
Be sure to let me know how it goes for you! If you still haven’t gotten your copy of How To Raise Your Black Child To Be A Millionaire: Child-rearing Secrets of the Black Elite, click here to get it. http://raisingblackmillionaires.com/product/how-to-raise-your-black-child-to-be-a-millionaire-child-rearing-secrets-of-the-black-elite-vol-1/
For you audio-book lovers, here’s the link to get the audio book as an instant download. http://raisingblackmillionaires.com/product/how-to-raise-your-black-child-to-be-a-millionaire-child-rearing-secrets-of-the-black-elite-vol-1-audio/