Helping loved ones establish or repair credit isn't something we think about too often, as bills and our own debt. Then, suddenly out of nowhere, a family member or close friend reaches out to you for help, "Hey dude, can you cosign for me?" or "You think you can add me as an authorized user on your credit card? I can pay the annual fee. I just need a little boost." After saying 'NO' to these requests, I began pondering about my 18-year-old daughter, who had not established any credit yet. Although she was active in her studies and campus life, she had no credit. A common mistake some parents make is avoiding the conversation until their child/children are in bad credit debt.
I hope you'll find the following credit tips useful.
Tip #1 - Help your child open a Credit Karma account.
Encourage your adult-child to open a credit monitoring account. There're hundreds of credit monitoring websites, but I went with CK because they helped me repair my credit years ago.
Identify the three-digit, non-existent, credit score, 000 to be exact.
Note the TIPS offered. They will steer your credit habits in the right direction.
Avoid applying for any recommended credit cards. This part will come, but not yet.
Tip #2 - Add your child as an authorize user on your credit card.
Don't just choose any credit card to add them to. Choosing a card with a lengthy credit history and a good credit history is key.
If the card is much older than the person you're adding, it mayn't give a true representation of he/she as an authorized user.
Make sure the card is in good standing, showing on time payments.
Make sure the card's usage is less than or equal to thirty percent of the total credit line.
Do not order a physical card for the authorized user.
(Option) Arrange how the authorize user fee will be paid. The fee will be charged to your card, but you could use this opportunity to reinforce responsibility in your adult-child. Arrange how the fee will be reimbursed.
"Bad credit is only a temporary situation! Take control of your rating." – Credit specialist
Tip #3 - Help your child apply for a credit card.
Once your credit activity is reflected in your child's account, he/she should apply for a credit card through Credit Karma. It may take a few months before your credit card activity is reflected. Be patient.
Once the card arrives, spend less than 30 percent of the total balance.
Pay it monthly. Do not pay it off in a lump sum, that will defeat the purpose of the card. Pay it normally, monthly, so you can have more quantity of payments reported to the credit bureau.
Tip #4 - Watch that score increase
Give 3 to 6 months to notice your child's credit score increase.
Tip #5 - Continue to encourage your child on maintaining credit worthiness.
Lastly, knowing just a little bit about credit can go a long way in helping your child succeed. You can learn more about healthy credit practices from these trusted websites. www.creditkarma.com www.transunion.com www.experian.com
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