How To Help Your Teen Build Good Credit
If you have applied for a loan, especially a car loan or a home loan, then you probably know how difficult it can be to get approved. Your credit is so important and most teenagers and young adults aren’t properly educated on the importance of acquiring credit and keeping their credit it good standing. They often don’t realize just how crucial it is until they decide they want to purchase a car on their own and find out that they can’t due to either lack of credit or bad credit. There is a difference between having bad credit and no credit at all. It’s very hard to repair bad credit and sometimes it take years to recover from a negative item on your credit. If you are a young adult or you have teenagers that are about to be eighteen they need to be educated and informed on the things they need to do in order to get credit and keep it their credit score good.
The first step it to open a checking account. Most banking institutions will allow a minor that is sixteen years old to open a checking account on their own. This is a great way to start teaching them how to manage their money and manage is properly. Making deposits and writing checks will help them learn how to keep their finances in order as an adult. When you are trying to decide on which bank is best for your teen you should make sure that you do your research and choose a bank that has free checking. If you want to find a good bank you can search for a checking account cypress tx. Then you need to sit them down and make sure that you teach them how to balance their checkbook so that they don’t write hot check or have overdraft fee. Overdraft fees are usually twenty five to thirty dollars per item and if you have two items that have to be covered that adds up quickly.
Next you will want to help them get a credit card. It’s always best to get them a credit card with a three hundred to five hundred dollar credit limit and let them work their way up to larger limit. This will teach them how to be responsible with their credit card because it’s going to be very tempting for them to max it out right off the bat. In order to get their credit score to go up they need to only charge between ten and thirteen percent of their credit limit and then pay that balance off at the end of every month. It’s also a good idea to have the minimum amount due deducted from their checking account automatically so that they do not have any late payments or late fees.
Doing these simple things will help ensure that you’re young adult or teenager gets a good foundation for their understanding of the financial world. It will give them a jump start on building good credit which will allow them to purchase a vehicle and a home on their own.