It’s never too late to start discussing the importance of finance with your children. Developing good credit habits will actually be helpful for them in the longer run. Establishing credit history at a young age can actually help young adults get better insurance rates, and enjoy the perks of getting a rental apartment or applying to get a loan from financial institutes.
Teenagers can get their credit cards at the minimum age of 18 years but before that, they need to have a better understanding of money management.
In this article we will share some tips on how your child can build credit from scratch. Also we will discuss how to get credit repair in NYC . So keep reading to know more!
Benefits of Building Credit from Early Age
In this age of digital era, building credit is crucial ; not only it will help financial institutions assess your credibility but also will increase your chances to avail short term and long term loans and with lower interest rates.
Because, teenagers have less exposure to credit and finance so they might not realize the worth of maintaining a good credit score at a young age. However, they can reap the benefits of maintaining a healthy credit score later on. A few of them are as follows:
Lower Interest Rates
Good credit score reflects good credit history, the more your credit score, the more you’ll be considered credible by the financial institutions. So, your loans will get approved easily and may be on better terms such as lower interest rate.
Renting an apartment:
Getting an apartment on rent is one of the huge financial burdens. Because landlords check your credibility report before renting out their property. And you can get into trouble without a credit report. For example: You might have to pay a large security deposit or arrange utilities on your own.
In some states your credit history is important to negotiate your insurance rates. Good credit can get you an insurance plan with low monthly premiums.
Getting a new job
Sometimes employers also look into your credit report before offering you a candidacy.
Refinancing your loans
Student loans are the need of the hour in this era of hefty fee schedules. So it is really important for students to maintain a good credit to refinance their loans or to get a steady job in the future.
So, the fact is the timeline of your credit score is very important to your creditors and lenders thus starting at the age of 18 or even earlier can give you an extra edge!
How Can You Build Your Credit History?
Teenagers learn to develop financial habits from their parents such as pre budgeting before shopping and avoiding hefty purchases all of a sudden. The same rule applies while building a credit score.
Therefore you should establish your financial position by building your identity first.
Establish Your Identity First
First, you need to establish your identity. Get important documents like your Social Security number and make sure all your personal information is correct. You should have a residential address, be it a rental apartment and a reliable source of income to build a strong foundation
Apply for a Secured Credit Card
If you’re a young adult with limited or no credit history, applying for a secured credit card can be a feasible option. However you’d need a cash deposit as collateral to apply for a credit card which serves as the credit limit. By using the card responsibly and making timely payments, youngsters can ensure their creditworthiness and establish a positive credit history.
Utilize the Credit Carefully
Ideally teens should use their credit with utmost care. Student’s cards already have a restricted limit so that you can develop a habit of spending according to your budget. However while using credit cards you should keep your credit utilization below 30% to keep your credit score representative. High utilization of credit cards shows your dependence on credit or your financial instability. Also, pay your balances on a regular basis so that your credit card utilization will be lower.
How Parents Can Help Children Build a Good Credit Score?
Number one basic rule that parents can teach to their children is budgeting. It’s a building block of financial management. Budgeting helps children to set short term goals of money making and financial planning. You can help them to segregate their amount in the 70-30 rule as 70% for the needs and 30% on savings.
Nowadays, there are also several apps in the market to help children to get the idea of scarce means and endless desires.
Make them An Authorized User
As a parent or guardian, you can add your child on your credit card account as an authorized user. They can make purchases and get benefits out of your credit history but they won’t be liable for any debt repayments. However, it is important for you to pay bills on time so that your child can get benefits. Further, giving them authority will also help you to monitor their spending habits and financial activities as they are using your account.
Get them a Student Credit Card
Teenagers above 18 years of age can have even more options to avail like they can have their own student card. They can apply for student loans if they have a reasonable source of financial income to repay the loan. Financial Institutions offer student credit cards however they are designed for a student with lower credit limits. Also, student cards offer subscriptions, bonuses, discounts and cash back on purchases, waiving off the late fee or acknowledging a good credit score.
Guidance from Credit Professionals
If you find building credit overwhelming or encounter difficulties along the way, seeking guidance from credit professionals can be beneficial. Credit counseling agencies and financial advisors can offer personalized advice and strategies tailored to your specific situation. They can help you navigate challenges, address any concerns, and provide expert guidance on building credit effectively.