How To Build Credibility For Children

One of the most influential things you can do to help your children succeed in life is to help them build reliability. To help children establish integrity, they can gain independence and knowledge in the field of personal credit and finance. This laid the foundation for how the financial situation would affect future life. Most Americans don’t even know that they can help build their children’s credit. From the perspective of the manor, this can really save them thousands of daughters, and prevent you and your parents from having to sign together, putting their credit in danger.

If you have the next question

How can I help my child build credit?

How should I establish a credit score for my child?

When can I start building credit for my children?

Can you build credibility by the age of 18?

Then you are in the right place. Because this article has an answer.

Family children’s credit

Start

Why is establishing credit so important

Before we discuss the best way to achieve our goals in depth, it is important that you understand the importance of building credibility for your children as soon as possible.

Let’s talk about the facts. On average, two of the three biggest purchases of “children” were college and cars. Because most children do not have a credit rating or credit, parents usually think that this is the only option, so they have the obligation to put the loan in their own name.

Well, it’s time to find out the facts

This will not do.

If you build a good reputation for your children as soon as possible, it will have a positive impact on their ability to shop in their own name, and accumulate and develop financial quality in the future. Even if you want to pay as a parent, it is still important to establish credibility on the child’s(or children’s) name as soon as possible.

Children are the greatest and most valuable responsibility we have undertaken in the first 18 years of their lives.

Unfortunately, this sentence is 100% correct for 5% of the family

Now many parents know that they have to raise and pay for their children until they are about 30 years old. In most cases, this can be avoided if they take the initiative to deal with the children’s credit early.

Even if you plan to pay a large amount of money to your children, it is still beneficial to establish credit, so you can apply for credit without the help of your children when you have time(no burden).

The second largest commodity our children buy is their education

A good education is expensive and priceless

As long as you go through a few small stages, you can establish your child’s credit as soon as possible, and establish a lifelong credit for them. If you

Why is my co signature important?

Buy Regal

If you live on for someone, you already know the risks you are taking:

If they default on the loan, it will ruin your credit.

One default will reduce your points by 80+points, and one offset/recovery will reduce your points by 150+points. Don’t damage your credit and your child’s credit by defaulting on the joint loan.

Due to the relationship between income and debt ratio, the ability to obtain loan approval may be impaired in the future.

Do you know that most people who refuse loans think it is because of credit cards? In most cases, this is actually due to income or loan paying ability. Most lenders only allow a debt to income ratio of 40-45%. This means that if you earn $3000 a month, lenders will allow you to increase your total debt from $1200 a month to $1350. Therefore, the total monthly debt of $500 for car loans, $600 for residential loans, and $200 for student loans is $1300. Suppose you want to buy another car a year later. You will reach your maximum debt to income ratio, which is additionally affected by the $200 student loan. Student loans are not obligations, but they still affect you and your credit.

Due to the exposure of credit risk, the future loan cost may be higher.

On the previous basis, the higher your debt to income ratio, the higher your “risk” to the bank. Therefore, they will raise your interest rate and further extend the loan term. Even if the loan you jointly signed is not necessarily yours.

You are the principal signer of all loans, so you are at risk of continuing to sign jointly.

Banks and borrowers are really picky, so when you see your children signing loans, you automatically think you are the main one. They will hesitate to approve the loan only in your child’s name and ask you to re sign it. This could become a big problem. Do you lend for your children’s future?

The 3 most effective ways to establish credit

There are several ways to start building credit for your child

The most effective way is to secure credit cards. The second best method is to mortgage installment loans, and the third method is to add to the credit card as a licensed user.

Look for all three methods

1. Secure credit card

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The biggest myth my parents taught us is that credit cards are the worst thing you can get. I totally disagree with this statement. But poorly managed credit cards are actually the worst thing.

As the saying goes, credit card is a necessary evil. In order to accumulate credit, credit cards are needed. If you want to use credit cards to buy things you want and need, it is important to use credit cards as the “entrance” to establish good credit. It is difficult for your children to establish credit, so the best thing you can do is to open a guaranteed credit card for them.

Most credit cards still have a pre-approval process. Most credit cards refuse to be approved by children. Therefore, it is recommended to use two different credit cards. Approval is guaranteed by default.

But what is a secure credit card?

A secure credit card is similar to an ordinary credit card because once approved, it will be received. But if you have a secure credit card, you actually use your own money to borrow money. This means that a refundable deposit is required before using the card. Deposit the amount of the desired limit into the credit card account and formulate the limit. Please see more details, as the minimum limit for most credit cards is $200, but the minimum limit for each credit card may be different.

Well, why should I lend me money?

Establishing credit is about healthy consumption habits and the ability to pay off credit cards every month. Although this idea seems silly, it has a great impact on children’s reputation.

Please remember that when applying for this credit card, it will only be in the name of your child. So if you are able to apply for these two credit cards, please do so.

important

Even if you give them the allowance, make sure your child has a certain income on the application form. If you take $0 as their income, any credit card they apply for, whether guaranteed or not, is likely to be rejected.

The first two security credit card recommendations:

#1 Suggestions

Credit card logo

Credit Builder Card

In our opinion, the credit builder card is the easiest card to apply for, and the approval time is the fastest!

Advantages of credit card:

Minimum deposit of $200

Report to three credit bureaus

No credit check!

No credit score required

#2 Suggestions

Open Sky Card Logo

OpenSky Credit Card

OpenSky Credit Card Benefits:

Minimum deposit of $200

Report to three credit bureaus

No credit check!

No credit score required

How to use a secure credit card

Using a secure credit card is easy! If you receive the credit card in the mail, you will make a small purchase(gasoline, some groceries, etc.). If you receive the first bill, you will want to pay off the credit card.

If possible, it is also important to set up automatic withdrawal in the bank. Please make sure you never miss the payment.

After the first purchase, you no longer need to use a credit card. No matter what your child buys, you will get credit for payment details.

The first purchase is important because it is the way to officially open the credit card and start reporting to the credit card.

2. Secured installment loan

This approach is almost the same as opening a secured credit card, but it is replaced by a mortgage. The reason why it is recommended to use guaranteed credit card instead of guaranteed split loan is that revolving credit accounts for the largest proportion of credit score at the beginning(30-35%), so it can provide the best credit promotion at the beginning.

Remember, having multiple credits is equally important. So if you have the financial ability, I suggest you open a mortgage credit card and mortgage installment loan in the name of your child.

Working principle and advantages of mortgage loan

Unlike secured credit cards, secured installment loans actually provide your children with savings accounts, so they not only learn how to save on the way, but also collect interest on the way, seeing their money increase.

Here’s how it works

As with secure credit cards, you can select the amount to set as a limit. The limit is generally $40.

Every month you will receive the bill you have to pay. They will report payment history in your credit report. Once you pay, the money will go into your savings account.

Here’s how different programs work:

Self pricing plan chart

although I will pay interest for my money, the advantages are much greater than the disadvantages

Always remember that there is a small initial cost in order to establish credit. But if you don’t start helping your child establish credit as soon as possible, it’s not even as expensive as it is!

3. Authorized user account

The last way to help your child establish credit is to add them as authorized users of credit cards. Otherwise, it’s called “pig back”. This method is only applicable to credit cards with good credit, and the balance does not exceed 30% of the total limit.

How Authorized Users Work

When added to a credit card as an approved user, you can basically get credit from the positive settlement details once a month. This program does not affect users or credit, but is harmless and helpful to approved users. This process will become destructive only when you issue them a credit card. I suggest not to do so. This will lead to bad consumption habits and affect their credit health. Most lenders do not believe that recognized user accounts are reliable in their credit applications, but this may help improve their children’s scores, which will help them establish their own credit records. It will help, which will play a role in their overall credit score.

How to add children as authorized users

Phone and laundry for the rich

This process is very simple!

Some credit card companies require children to be at least 18 years old, but most credit cards are invalid

You can call the customer service hotline of your credit card or log in to your online account to find options that can be added as a licensed user and easily add them. Usually, they choose their own name Ask the social security number and if they want to send a card. This program may take 30-35 days to report the child’s credit, but it’s worth waiting.

Once they are added as authorized users, you can sit and wait!

Please always pay regularly(it is better to set automatic payment) and keep a low balance.

If you find yourself in financial difficulties and your credit card is at risk of being unable to pay in time, you must immediately remove your child from the credit card to protect their credit score.

Remember, you can always easily re add them, but if you make any derogatory comments about their credit when their name appears on the credit card account, it will also have a negative impact on their credit.

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My parents, my school and even my financial adviser have never taught us this. It’s crazy… This is a simple way for our children to achieve financial success!

What is more crazy is that this process may be very helpful to exempt children from the responsibility of economic contact within 10-20 years after their parents leave the nest

Parents prepare their children for school

As parents, our goal should always be to make our children financially independent and have a healthy reputation. This is a big step in this direction.

Share with anyone who thinks it will be helpful to find value in this article. If not, please leave your thoughts and comments on a problem below.

Wish you a healthy credit day!