Good credit scores will help your child open an account, obtain a loan, and get a reduced premium from different insurance providers. Even though, it might take a number of years borrowing a small amount of money from companies and making regular payments on loan to build credit score, you can help your child get where he or she needs to be.
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Prepaid Credit Cards
Try purchasing a prepaid credit card that is in your child's name. With a prepaid credit card, anyone is capable of owning an account. Ensure the credit issuer is going to submit a notification of payment every month to all of the credit bureaus. Reporting a solid payment history will help to build your child's credit rating.
Traditional Credit Card
Depending on your situation, you can co-sign on a regular credit card along with your child. It is necessary to realize that you will be the one liable for any financial debts your child incurs while you are a co-signer. Make sure your child is capable of making the monthly payments so that you are not stuck trying to pay the bill later on.
Obtaining a Loan
Your child can build credit score by getting a small loan to help take a bicycle or other item. Most of the time, a bank will lend a small amount of money to a minor if a parent is willing to guarantee the loan.
Pay Attention to Balances on Credit Cards
Tell your child the importance of maintaining a small balance on a credit card. Credit agencies will look at the number of credit accounts and evaluate the available balance with the total credit limit on the card. If your child is able to get a credit card with a $1,500 limits, maintaining a balance below $100 will help the credit score rise.
Education is Essential
Help your child with applications for gas cards and department store credit cards. Encourage your child to make a small purchase and pay the balance off as soon as the bill comes. The more credit your child has, the higher the score can be as long as monthly payments are made on time on a regular basis. Just one late payment can cause the credit score to go down.
Leave Accounts Open, Even When Unused
Even if, your child is no longer using an account, the account should remain open. A credit card for a store where your child no longer shops should not be closed. Although it seems like the logical thing to do, in reality, open credit accounts that do not have a balance will actually help improve credit scores.
Your child will have a strong credit score if you complete the aforementioned steps. The main point to teach your child is to pay bills on time every month. Don't allow payments to lapse or bills to get so high that they cannot be paid off every month. Doing so will only create a credit score to decline with providers and institutions everywhere.
Nigel Hampton writes on a variety of topics including law, finance, politics, credit, bankruptcy and other noteworthy issues. Lately, Nigel has focused on credit repair.