Teens and Credit, How to get Them Started
As data becomes a bigger and bigger part of our lives…getting off to a good start with credit is critical. The sharing of your credit data determines not just how much you pay on a loan, but also your ability to get a job, and how much you pay for insurance and rent.
Even if you prefer to pay for everything in cash, a good credit history will be there when you do need to borrow for something big.
That’s why it is so important to start early when building credit for your teen. Credit reporting agencies look at payment history, types of credit, length of credit, and credit utilization to determine your score.
One way to get these variables pointed in the right directions is to get your teen started as soon as possible. Typically this means shortly after their 18th birthday. Here are a few things to think about before you start with your teen:
- You will most likely have to co-sign to assist your child in the application process.
- Make sure your child is mature enough to make payments on time and every month. You can do even more damage than good if they abuse their credit. Don’t start by digging a hole.
- The earlier you start the better. As mentioned earlier, credit-reporting agencies look at length of credit to establish the likelihood of repayment. So, starting early can insure, with proper care, they won’t need you to co-sign in their 20’s.
- Credit Utilization looks at the amount owed vs the total limit. So for example, if your teen has a credit card with a $1000 limit and an $800 balance, their utilization is 80%. For the best results have them stay below 30% usage or $300 balance.
The difference between a 700+ credit score to a 600 credit score could mean thousands of dollars over the course of a lifetime. So start your child off early, then teach them how to build credit. WCCU also offers a credit builder loan where young borrowers set aside the loan amount in a savings account. This allows them to build credit while not actually going into debt.
Call one of our knowledgeable lender to get started! 920-233-9096