5 Simple Ways to Help Your Kids Build Good Credit

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Switching cell phones and gym memberships are just two of the missteps that may sink credit. Read on for more tips.

As early as when your kids are juniors in high school, you should urge them to build credit. Think that’s too soon for them to accept the responsibility? You may want to think again, Bill Hardekopf, chief executive of LowCards.com, a credit shopping website, tells CBS Moneywatch.

“It worked really well for us,” said Hardekopf. “Our kids are all financially responsible and had five years of credit history when they got out of college and started applying for loans. That gave them a real advantage.”

Sounds great, but what are key ways youngsters can establish solid credit histories? Hardekopf and others suggest these five starting points:

1. Walk kids through the basics

You might assume your kids understand credit fundamentals, but they may not. Missteps with credit can haunt people for years. Even if kids seem resistant to hearing about the importance of on-time payments, the risk of high credit-card debt and the importance of not assuming others’ debt, have the conversation periodically and have faith that they will be listening at some point. If possible, start talking to your kids about credit when they enter grade school, recommends NerdWallet. Understanding credit is a life skill.

2. Allow teens to use credit cards you monitor

Prior to 2009, teens could obtain credit cards on their own. The Card Act of 2009 ended the practice, notes CBS MoneyWatch. Now teens must use parents’ accounts, have a parent co-sign for a credit card, establish a relationship with a bank that comes with a credit card or obtain a secured credit card. Doing so allows you to ensure your teen learns solid practices that include keeping credit card charges low, regularly paying charges in full, and routinely sending on-time payments.

3. Don’t let them walk away from gym memberships (and the like)

The myriad of available gyms makes it all too easy to enroll. The problem is that when people don’t follow the written cancellation policies, it can hurt their credit scores, according to U.S. News & World Report. Learning to read the fine print of all contracts, especially in the rush of enthusiasm to sign up, will save headaches down the road.

4. Urge them to think twice before switching cellphones

Like gyms, cellphone providers make it appear easy to enroll. The problem is that most cellphone providers run credit checks on applicants. That can affect a person’s ability to get more credit later on. If your teen has minimal or low credit, urge them to hold off on switching providers, reports U.S. News & World Report.

5. Remind them that credit is a long-term commitment

Maybe your kid doesn’t want to remember her indulgences at a teen clothing store, so she cancels the credit card. Closing a long-held credit line can negatively impact your credit for several reasons including your debt-to-credit ratio, notes Motley Fool. Urge your kid to keep credit lines to demonstrate a long, well-earned credit history.

What tricks and tips do you have for helping young people develop good money sense? Share with us below or on our Facebook page.

Stacy Johnson

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