In the United States, it can be difficult to get by without a credit card. People who don’t have a credit card or credit history may find it harder to get a loan, rent an apartment, a car or even a hotel room. These little things can loom large when they become a necessity. Having good credit is definitely an extremely important advantage. It can positively affect your ability to get a job and will help you obtain less expensive loans with lower interest rates. Having a good credit score is especially at a premium today, when a large number of people are defaulting on their loans and being forced to declare bankruptcy. In this article, we will primarily be catering to the needs of parents or those people who are entrusted with the care of a teen or college student. We will explain how to help a student properly and responsibly build credit.
Have “The Talk”: When most people think of the “the talk,” they think of sex. Just as unprotected and irresponsible sex can lead to a host of problems, so can the unbridled use of credit cards or other types of debt. Parents have to begin thinking in these terms and tackling the issue with the seriousness it warrants. It is important to make students understand exactly what they will be risking if they choose to make purchases that they cannot afford. Poor credit limits life choices and, for this reason, not paying attention to this threat is anything but recommended.
Helop your student come out of credit shell
Let Them Practice: Once your teenager or college student has proven to be responsible with money, you may want to give him or her a credit card. However, set conditions. Require them to agree to show you the statement every month and tell them up front that the card is subject to revocation if they make purchases without notifying (or asking) you first. Then follow through. If they use the card responsibly, they will be able to build up their credit. If they do not, it gets taken away.
Help Them Take Out a Loan: If your students need money that they don’t have and you don’t want to give it to them just like that, consider helping them take out a loan (for a small amount). You might have to co-sign for it. Now, remember, only take out loans that both of you can afford to pay back. If your child defaults on it, you may be forced to make the payments. Perhaps consider a small student loan to pay for a college course or two. If your student pays the bill on time, this will show future lenders that he or she is a worthy credit risk and will help them qualify for loans or credit cards with tempting terms in the future. This will be because they have a developed a history of paying back what they borrow.
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In the United States, the ability to obtain credit cards and loans is very important. Most people do not pay for cars or homes with cash. Instead, they take out a loan. Many smaller purchases are made using credit as well. It simply is a way of life, though it may not be the wisest way to live. Because credit is used so readily, even to judge ones character, it is important to have a high credit score. This is much easier to obtain if one starts building their credit as a young adult.
Getting off to a good start can make life so much simpler. Parents can play a big role in helping their young adults establish a good foundation. They can do this by speaking to them about money, including the importance of saving it and how to borrow responsibly. Next, they should give them practice handling money. This might include helping them get a credit card, a traditional one or perhaps a pre-paid one. Assisting them in getting an affordable loan can also help them build their credit history safely and responsibly. It is much easier and a much more pleasant experience to help students learn how to handle money than it is to have to bail them out of trouble. Though teaching them may be frustrating, it will definitely be worth the effort
