Credit repair guru and financial coach, George Burgess has listed five secret hacks on how parents can give their kids great credit before reaching 21.
George believes it’s never too early to start building credit for a child, especially in college. From his vast experience in credit repairs, George knows that one’s child can land a dream job, save several thousand dollars, but still be unable to obtain a loan for a car or a house without a solid credit history.As a panacea, George provides insight into the options for building a solid credit, with some options costing a little money, at least in the short-term. In contrast, other options are free but carry more risk.
From George’s vast array of knowledge on credits, one of the methods of creating a good credit history is getting one’s child a secure credit card. A secured credit card appears to be just like any other credit card with one key difference: A deposit has been paid to open the account. The available credit limit is no more than the amount of the deposit. Shedding light on this, George explains that “While regular payments still have to be made, the bank offering the card is 100% covered. If your child fails to make the payment, the money is taken from the deposit. Additionally, he notes that:
- In time, many banks will allow a secured credit card to be converted to a conventional credit card.
- The deposit is returned when the card is canceled. Keep in mind that these cards are often loaded with fees, making them expensive to use.
From George’s sagacity, co-signing a loan is a second way to create a good credit history for a child. He teaches that parents should allow their children to take out a small loan with their support. “The amount doesn’t have to be large; even a few hundred dollars is enough to start building a solid credit history. Just ensure that the loan is getting paid. It’s not a bad idea to keep the proceeds from the loan in your own account and make the payments yourself,” he remarked.
Using a secured loan is the third viable option. A child can use a savings account as collateral for a loan. Banks love this type of loan because they’re 100% covered whether the borrower makes the payments or not. The funds in the savings account are released as the loan is paid off. According to George, “these loans are easy to acquire and work as well as any other means of building your child’s credit”.
Still drawing from his wealth of perception on credit repairs, George knows that adding one’s child as an authorized user on the credit card account is another way to build a good credit history. “This is easy to do, too. A quick call to the issuing company is all you need to do. Your child will receive their own card with their name on it. Any changes they make will appear on your bill. This is good news since you’ll be aware of their spending habits.” However, George makes a note for parents to remember that it’s still their account and your responsibility. “If your college student flies off to Cabo for a wild weekend, you’re still as legally as responsible as your child for the bill”, he explained.
The fifth secret hack for building a solid credit history is to co-sign a credit card. “Your child will have their own card, and you won’t receive the bills. How much do you trust your kid? Be careful. As a co-signer, any failure on the part of your child will affect you, too. You can be held responsible for the bill, and your credit rating can be harmed, too. This is the riskiest option for a parent”, George warns.
On a final note, George Burgess explains the importance of building a good credit history before it’s even needed. “If you’ve ever had poor credit, you know how challenging it can be. It can limit your options. It’s natural to want to give your child a solid financial start by beginning the process of establishing credit before they complete high school. Investigate all of the available options and put a plan in place”, he said.