Foundation for Kids Credit
It’s practically impossible to do anything these days without a good credit score. But, 15% of your credit score comes from just having credit history, which means that young people are starting out at a disadvantage. Thankfully, there are some things you can do to help your child develop their credit score before they’ve moved out of the house.
Open a Savings Account
It’s never too early to start teaching your child about money. One way to do this is with a child’s account in a bank or credit union. Encourage them to save their allowance, money they get on birthdays, and any other money they end up with. While this won’t impact their credit score now, it will set them up for a lifetime of good money habits. What age you can start this depends on which bank you go to so shop around your local banks and credit unions.
Add Your Child to Your Credit Card
When your child heads into their teen years it is possible to add them to your credit card as an authorized user and this will help them start to develop a credit score. Of course, it’s important that this credit card be used wisely and gets paid off in a timely fashion or else it will start negatively impacting your credit score and theirs.
Co-Sign on a Loan
This is perhaps the riskiest suggestion for your own credit score. Co-signing on your child’s loan will help them be able to secure a loan that if they pay back as they are supposed to will help them with build credit. However, if they stop making payments on that loan then you will be responsible for paying it off.
Encourage them to get a Student Credit Card
If your child is going into college encourage them to get a Student Credit Card. These cards are designed specifically for college students in mind. This means they don’t have very high credit requirements to get approved for it.
Help them Save for a Secured Credit Card
If your child isn’t going to college, or they can’t get a Student Credit Card for some reason then a secured credit card might be the right option for them. A secured credit card requires you to save up a certain amount of money to get the credit card. The card is then available to them, typically in the amount that they saved up. So, if you saved $500 to get a secured credit card, you would have $500 in credit on that card.
Open New Forms of Credit (Cell Phone, Utility Bills)
Another way to build credit when you’re young is by getting a cell phone you pay for monthly and having utility bills in your name. Being able to show that you can faithfully pay all of your bills every month is a great way to develop your credit score. Of course, this isn’t very easy to do if you’re still living at home with your parents and it means that you can’t be on the family cell phone plan anymore. But in the long run, it will be worth it.
