10 Tips To Start Building Credit For Your Child

Introduction It is crucial to develop solid credit for every child so that they do not struggle later in life. Maintaining good credit is important because individuals receive more favorable interest rates for things such as cars, college tuition, and homes. Nevertheless, what most parents are unaware of is how to go about establishing their child’s credit. The good thing is that you can take practical measures right now, while your child is still young, to prepare him or her for credit success. By following the ten tips below, parents can assist their child in developing a positive credit history from an early age.

• Tip 1 – Make Your Child an Authorized User The first method of creating credit for your child is by adding them as an authorized user to your credit card account. The primary cardholder (your credit history) will be used when your child is an authorized user of the card. Payment activities for the card are reported on the authorized user’s credit file, regardless of whether the actual cardholder has ever used the card or not. This is because they can leverage your good credit status. However, the best thing to do is to ensure that one selects a credit card that they would pay back wisely.
• Tip 2 – Teach Them How to Open a Secured Card A secured credit card works by having to pay a cash deposit of an amount that is equal to the credit limit that is being provided. This way, the deposit ensures the issuer that the account holder has the funds to make payments if required. Secured credit cards are useful for individuals with no credit history or poor credit history to establish or improve credit. Encourage your teen to apply for a secured card and be prepared to help out with the initial deposit if necessary. If the card is used responsibly, then it will lead to the credit report being updated with positive information.
• Tip 3 – Add Them As Joint Account Holder Of Your Bank Account Bank accounts are not like loans or credit cards that get reported to credit bureaus. However, being a joint owner of your bank account makes your child learn how to balance his expenditure and income. They can also observe such activities as checkbook balancing, statement checking, bill payments, budgeting, interest-earning, and many other related operations. They will find these skills useful when they are being issued their first loan or credit card or something of that nature.
• Help Them Open a Checking Account – Tip 4 Having a checking account in your teen’s name helps them gain practical experience in opening bank accounts before Crews throws in credit. Account holder: This is a very important aspect of the account as your teen will be in charge of balance, overdrafts, transactions, payments, bills, and all other financial management affairs. This real-world practice builds money skills that result in the responsible use of credit.
• Tip 5 – Assistance in Opening a Savings Account Savings accounts are useful in creating disciplined saving habits which are essential before credit. Your teen can use their savings account to save money for a certain item instead of using credit cards. Being able to track their hard-earned money put aside in those savings would teach the teenagers patience and the ability to wait before they borrow money, important traits for creditworthiness later in life.
• Tip 6 – Have them get a part-time job. Income generation is not the only advantage that comes with part-time employment for teens in their teenage years. It encourages responsibility, budgeting, and other attributes that are important in credit success. Your teen can pay for purchases using his/her income from the job without having to borrow money. Handling money responsibly and savings from an early age are easily transferred to handling credit responsibly.
• Tip 7 – Share information about credit with your teen It is recommended that the following financial responsibilities start as early as possible; the responsibilities include: responsibility regarding credit, responsibility for applying for new credit, understanding credit reports /scores, and protecting credit from identity theft. Attitudes and habits concerning money are learned by children from their parents. Cultivate a financially responsible mentality in your teen and make them understand that good credit in the present years will be beneficial to them in their adult life.
• Tip 8 – Assist Them in Accessing Their Credit Report At the age of 16-18 years please assist your teen to obtain a copy of credit report from AnnualCreditReport. com. This makes them learn credit reporting for themselves. Every year they can check their credit reports from Equifax, Experian, and TransUnion for possibly any errors or fraud. Closely tracking the credit report data is also important to ensure that all credit records are in good standing.
• Tip 9 - Make Them an AU Later On When your teen is in the last one or two years of high school, it would also be useful to include them as an authorized user on a credit card with a lengthy credit history of timely payments. This will quickly build their credit history shortly before applying for student loans, apartments, cell phones, and other services that consider credit reports. However, only add them after you’ve taught responsible credit behaviors!
• Tip 10 – Manage Their First Credit Application Alone When your teen is applying for the first individual loan or credit card, try to be supportive. Give information about how to consider terms, fees, rates, and providers for identifying an ideal match. Also, remind consumers to practice sound credit management including the need to always keep low balances on their cards, to pay their bills on time each month, and to review their statements for errors. Supervise this sort of ‘rite of passage’ to ensure that it leads to credit positives.

The Takeaway As you well know, credit is something that your teen may not be thinking about at his or her age. However, as a parent, you can ensure that early enough you put in place measures that will enable them to have responsible credit. First, parents should demonstrate positive financial behaviors and engage their children in constant discussions of content relevant to the management of money and credit. Keep communication with your child open and help shape your child’s credit as young as possible corresponding to their age. Teaching your teen how to build a credit history will prove advantageous to him or her later on in their life.

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