Teaching our children about having a good credit score is another thing on the list we parents need to teach our children before they leave the nest. I find that it was important my children had a good financial foundation about money management rather than for my husband and me to build their credit history for them. I didn’t want to do all the homework for them when it came time for my teens to take the test and they failed because I have been doing all the work!
Even before your teen can apply for a credit card or loan, you can help them get a head start by developing a strong credit history. From teaching them the financial foundation of managing money, steady income, and good personal banking history, there are some simple ways to help your child build their own credit.
Take a look at these 5 Ways to Help Your Teen Build Strong Credit!
1. Is Your Teen Ready?
One way to determine if your teen is ready to build their own credit is by their current responsibility. Are your teens able to manage their own income if they have an allowance or job? Does your child meet deadlines like paying any expenses off they are responsible for? Do your teens come home when their curfew is?
2. Teach Your Teen About Credit
The first step is teaching your child about credit cards and how to build up a good credit. Make sure your child understands the importance of credit card balance and that this credit needs to be repaid. The faster it is repaid the better.
3. Encourage Your Teen to Get a Job
Having an income is a key factor when it comes to qualifying for credit. In order to get approved for a credit card, a job can be the winning factor that can help get your teen get one. Starting early on building credit can help your teen build a stronger credit over time. The more experience or history of showing credit gives your teens a better chance of getting approved for more credit in the future.
Your teen will also be more invested in managing their money if it is their own money being earned. Working a job also allows your teen to learn responsibility and how to manage their money right.
4. Open a Checking and Savings Account
Establishing a good banking history can help your teen build a strong financial foundation. It’s a stepping-stone that can also help your child build a strong credit score. Teach your child the importance of making regular deposits into their account, spending wisely, and avoiding overdrafts or declined debt card charges.Get more info at usloanoptions.com of everything about loans.
Your teen will also learn more responsibility by managing and maintaining the basics of having their own checking and savings account. They will also get a feel of how to use a card and to check up on their transactions.
5. Try a Secured Credit Card
A secured credit card is a great option to first teach your child about credit cards. It’s also a safe option since you must put down a security deposit against the credit limit. For example, putting down a security deposit of $300 would only allow your teen to have a $300 credit to spend. The secured credit card can still be used for making purchases and monthly payments like a normal credit card would.
The best way to go about this is adding your teen as an authorized user on one of your credit card accounts or a brand new account you start for your teen. Normally an authorized user gets all the same benefits of using the credit card and including a credit history on the credit report. As well, the authorized user doesn’t have legal responsibility for any of the debt on the credit card.
If you child is an authorized user, then you have control of the account. So if your child becomes irresponsible and overspends then you can remove their authorization user status and close the account.