How to Help Your Child Build Great Credit
As one of my great mentors once told me, “With decent credit, and a little bit of money, the world is your oyster”. One of the best things you can do as a parent is to make sure that your children understand how to build and maintain great credit. If you’re here now, you’re already headed in the right direction. We have TONS of free information regarding these topics.
We tend to fear what we don’t understand, it’s just human nature. Imagine being 10 years old, your parents throw you the keys and tell you to hop in the car and go for a spin. You manage to get it started and of course everything after that is a complete wreck. Just like anything that moves you forward in life, your credit is a VEHICLE. If you want to travel safely, you should take the time to understand how it works.
First myth, “Nobody really knows how credit works”. As consumers, we may not know the specific algorithms being used to calculate our scores, but we do know just about everything that affects our score and how the bureaus use that information to determine your score. Second myth, “It’s better to have no credit than to have bad credit”. This is simply not true, if you have no credit you pretty much can’t get approved for anything except a secured credit card.
I am not a financial advisor, but in regards to building and maintaining great credit, I would strongly advise that you start with basic money management skills. The sooner the better. If you’re concerned because you can’t balance your checkbook on a coffee table, well I say better now than never. After a little due diligence you’ll find it’s about as simple as operating a doorknob. If you made it in or out of your home today, then I have the utmost faith in you.
Next you can help your child begin both primary methods of building credit, the fast way and the traditional way. If you have good credit already, you can add your child to one of your accounts as an authorized user. This does not mean they have to have access to your account. It will simply report to their credit history after the first reporting period, which is usually at the end of each month. After the account has reported, their score will increase considerably. You can then begin the traditional method of building credit which is covered in our article titled What Is the Secret to Develop a High Credit Score?.
We strive to emphasize the importance of an abundance mindset with all of our clients, a major component of helping you achieve and maintain great credit. By knowing your options, you realize there's nothing to lose, but everything to gain.