As you prepare your young adult to head off to college, it’s important to make time to talk about their road to financial independence, which includes building credit. Healthy credit is vital in big life moments like getting a car, apartment, house or job. Your child’s credit report will be the financial resume that helps them achieve these goals.
Use these tips to talk to your student about how to build a financial resume they’re proud of so they can confidently take steps toward the financial freedom and flexibility they’ll need to reach their dreams.
It can be challenging to get started on your own without previous credit history. As a parent, you can help your child start building their financial resume early by adding them as an authorized user on your credit card. Just be sure you always pay on time, because your student will inherit that part of your credit story. Set clear guidelines about card usage before adding your child as an authorized user, and monitor the authorized user’s card use, as all reported account activity, including negative information, will impact both your credit.
It’s essential to consistently pay all bills on time to build credit health and a story of trustworthiness on your child’s financial resume. If they will be renting, their landlord may report rental payments to the credit reporting agencies, so ensure they always pay their rent on time. Talk about putting your student’s name on phone or utility accounts, and then maintaining good standing with on-time payments. Timely student loan payments can also help build credit. Explain that if accounts go into collections or delinquency, that information will hurt their credit health.
Your child should understand what financial story they are telling to creditors on their financial resume. Young adults who move often should confirm their current address is on their report, along with accurate, up-to-date information for everything else on file. Inaccuracies can negatively impact credit health and ability to get credit. Everyone is eligible for a one free credit report from each of the nationwide credit reporting agencies each year. Have your child take advantage of the opportunity to check their report at annualcreditreport.com.
When they’re ready for it, discuss opening one credit card in your child’s name so they can start to build credit length — another important credit score factor. A student credit card may be a good bet for college students because they generally have lower limits. But be sure your young adult does their research and finds the best fit for their situation. Opening a card, keeping the balance low and making on-time payments can help young adults build their financial resume’s story of responsibility, which could lead to more creditworthiness in the future.
For more tips, read up on how to help your young adult build credit history with credit cards.