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Sean Talks Money: How To Improve Your Child’s Credit Score

My sister Megan is a college student and only 19 years old. She called me asking for advice on getting a new credit card for herself. Because she’s a college student, I thought she’d qualify only for a student or secured credit card. Before I asked what her credit score was, I spent 10 minutes talking to her about secured credit card options and of course how to improve credit score.

Her answer? 778, I was floored because this number is considered well into the “excellent credit”
range and she was not required to improve credit score. My baby sister’s credit score was just 20 points lower than my own. After some digging, I got to know that my parents had gifted her near-perfect credit when she graduated from high school. Isn’t it something new? Here’s how my parents did it and you can try to do the same for your children.

How it happened

Megan’s score reveals some interesting stats:

 The average age of my sister accounts is 7 years and 2 months, when she was only 12.

 The oldest credit card is older than she is.

 Over $100,000 credit line.

 12 open accounts.

 An unblemished payment history.

Those stats aren’t errors and reflect the power of “authorized user” status. Giving her direct access to their credit cards, my parents make it easier for Megan to spend money on school trips, dance camps, or groceries. As a result, she has an amazing credit.

“The first time I found out my what my credit score was, I had applied for an apartment, and they requested my credit information,” Megan told me. “I remember sitting at the desk in my dorm room, and once I found out, I immediately called my mom and then I ran around and told all of my roommates. Sadly, they didn’t share the excitement, since they had no idea what a
credit score was.” Source: The Huffington Post

You can add your children as authorized users on your credit cards. Here is what you should remember:

 The authorized user approach works only if you’re paying the bills on time, and keep the balance low. Missing a bill or any mistake you make on your card, would not allow your child to improve credit score, in fact, damage it further.

 If you’re worried about the kid’s use of card, don’t give them actual cards. You can add them as authorized user and when the mail comes, shred or bury the card. Your children will enjoy the benefits regardless of whether their card is ever used.

 If you trust your children, make sure they know the card security basics and that they will protect your credit card information and never leave card lying around in public sight. This could hinder to improve credit score as well.

My mom, Kristen, added: “Make sure your child understands the importance of credit and that it isn’t free money. They can go and buy something on credit, and it be pretty easy, but they have to understand that the charge has to be paid.”

This story was seen on The Huffington post, but should you have questions about how to improve credit score, please contact United Financial Counselors.

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