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Are Your Teenagers Building Credit Yet? (They Can and Should Be)

August 31, 2015

If you have kids who are just about to start college, you may have realized that building a solid credit history is the least of their concerns. Most young adults do not know how credit works, or how important their credit score is. A good credit score not only helps get better rates when taking out loans, but also assists in reducing down-payments. Some employers even use credit scores as a filter to narrow down the list of applicants for a job. Therefore, it is essential that your child starts early and builds credit over time. Without a credit history, it is very difficult for a lender to judge whether to provide loans.

Here are a few approaches a young adult can follow in order to establish a sound credit history:

Become an Authorized User: The simplest way to establish a credit history is to get a credit card. However, if your children are not yet 21 years old, it may be difficult for them to get approval for one, unless they can prove their ability to make payments with their own income. In such cases, you may give them an option to become an authorized user on your credit card.

Opt for Secured Credit Cards: In case of secured credit cards, borrowers make an initial deposit, which acts as collateral for the amount they borrow. The credit limit on the account is based on how much is put down at the start. The advantage of this type of card is that once card-holders demonstrate that they can pay the minimum amount due for a period of time, they may be allowed to upgrade to an unsecured card.

Get a Store Card: Store credit cards are easier to obtain than standard credit cards; however, they charge a higher interest rate. These cards may help a person build credit as long as he or she carries a modest balance or pays it in full with each billing cycle.

Build Credit Through Rent: Two of the three major credit bureaus, TransUnion and Experian, track rent payments. If your child is renting an apartment, it is advisable to get his or her name on the lease. In circumstances where the building owner does not pass on payment history to credit agencies, paying rent through services such as ClearNow, WilliamPaid or RentTrack ensures that the remittances appear on the credit report.

Once your children are old enough, they can apply for their own credit card. During this process, they should not only consider cards that have low rates, but also what they are eligible for, what types of cards are reported to the credit bureaus and how much financial responsibility they are able to take on. By making payments on time and staying below 30% of their card limit, they can stay in the good books of lenders.

With a little bit of effort, young adults can successfully build a strong credit history over time. At Fund&Grow, we have an experienced team dedicated to helping individuals achieve their financial dreams, without incurring high interest fees or negatively affecting personal credit. Our flagship program helps you acquire from $50,000 to $250,000 in unsecured credit at 0% interest. Contact Fund&Grow today by emailing or calling (800) 996-0270 and talking with one of our specialists. Let us help support you in reaching your financial goals for your whole family.

I take tremendous pride in building positive and lasting relationships in my businesses and personal life. Every member of my team is committed to helping our clients get the maximum amount of funding possible and achieve their highest growth potential.

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