How to Help Your Child Develop a Good Credit Score
We all want the best for our kids. One of the most valuable financial lessons you can teach your child is how to develop a great credit score. A high credit score can save someone tens of thousands of dollars over a lifetime – and alleviate many potential nightmares. By helping your child develop a good credit score, you can set them on a path to financial freedom and success.
There are several things that you can do to help your child begin his adult life with an excellent credit score. Implement a few of these ideas and your child will be well on his way to a financially comfortable life.
Help Your Child Sign Up for a Secured, Student, or Low-Limit Credit Card
One of the best ways to help your child get started financially is by setting them up with a secured, student, or low-limit credit card. These cards are easier to acquire than traditional credit cards, and still assist in developing credit. Therefore, by helping your child setup a basic credit card, she can begin developing credit and learn how to handle her own debt.
Co-Sign On Useful Loans
Although your son doesn’t need a new sports car, he does need a car to get around. Furthermore, owning a home is often a much better financial decision then renting. Therefore, consider helping your child get those first loans by co-signing. You will want to make sure that the loan is a good decision, and one that you feel comfortable supporting, but backing your child’s first borrowing activities can help your child improve her credit and start life from a more financially stable position.
Encourage Your Child to Keep Accounts Open
One of the criteria used to calculate someone’s credit score is the length they have had financial accounts open. Therefore, when your child moves, or takes off to college, suggest that they may benefit from keeping a bank account or credit card active – provided there are no fees associated with the account. When lenders view successful and consistent payments extending back many years, they will feel more comfortable providing additional financing to your child – more confident that he or she is knowledgeable and capable of managing debt.
Educate Your Child on How to Manage Finances
This cannot be done too early – and, although it doesn’t directly affect someone’s credit score, it is essentially the long-term determiner of whether or not someone will maintain a high credit rating. From the moment you begin giving your child an allowance or paying them to do odd jobs around the house, start encouraging them to manage their money wisely. Show them the value of putting some into savings, some into giving, and splitting the rest between long-term goals and short-term purchases. If your child understands how budgeting and financial management works before they start developing a credit score, you can be confident that developing and maintaining an excellent credit rating is something they will be very capable of accomplishing.