How to Help Your Teens Build Good Credit

Good parenting involves teaching your teens about good money management. You can help them learn about credit and provide hands-on experience so they can build a positive credit score for themselves instead of making a history for them.

Before giving your child a credit card

Encourage your teen to get a job. This will allow him or her to have a steady and reliable income to repay the credit card balance. Do not let them rely on allowance alone. They must pay for their own balance, not you.

Help them open a savings or checking account

A good banking history can help your teen build a strong financial foundation. Regular deposits, learning how to spend wisely, and avoiding overdrafts are important lessons to teach them.

Make sure the time is right

Assess how your teen manages money. Where does his or her income go? Are deadlines met? Do you have to pay for overdrafts?

Teach them how credit works

Help your child understand how credit cards work and clear up any misconceptions. They must know that credit card balances must be paid in full every month.

Here are your options

Ideally, your child will be able to build credit under their own name without you having to put your own credit on the line. They can apply for credit where they have their savings or checking account. Other options are:

Retail card

This is a solo credit card offered to people with little or no credit history. Credit limits are low and interests are often high.

Secure credit card

In brief, a secure credit card is just like any regular credit card but it requires a security deposit against the credit limit.

Add your child as an authorized user

You can also start your child’s credit history by adding him or her as an authorized user on one of your credit card accounts. They get the full benefits of the card with a credit history on their report.

Joint credit card

This can be risky because the spending habits of your child may affect your credit. It may be simpler to let them have their own account that you can close if they become irresponsible. Of course, what matters here is that you teach them how to build a good credit score. Everything will be new to them so guide them every step of the way.

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