As a child, credit building can seem difficult. However, it is possible. There are a few things you can do at a young age to start building credit. A minimum of one credit line is a great place to start. You can also co-sign a credit card or loan.
Authorized usership
Credit building is an essential life skill. However, it can help you get the things that you desire later in your life. Good credit can help you get the best terms on financial products and even save you money. It takes research and some planning but it will pay off long-term.
Co-signing a loan or credit card
You need to be careful when you co-sign for a loan. It is crucial to determine if you trust the person signing the loan or credit card agreement and whether they can afford the obligations. Banks won't be interested in your good intentions. Instead, they want to ensure that you pay the debt.
Get a cell-phone plan
You can build your credit and get a low-credit cell phone plan. There are many options available, including prepaid plans that won't pull your credit. These plans are a great option for people who don't want to commit to a long-term contract. Prepaid plans are also typically much less expensive than traditional plans. You can also add users for very small fees. Major carriers often offer incentives for adding more users.
Secured credit cards
You can build your credit history by getting a secured card. These cards can be used in the same way as regular credit cards but require a deposit. This is usually equivalent to the credit limit. In addition, your activity on these cards is reported to the three major credit bureaus, which can help you establish your credit history. This will eventually allow you to get a regular credit line or other credit products.
Getting a debit card
A debit card can be a great option for anyone who is interested in building credit. A majority of banks offer new customers a free FICO score once per billing cycle. In that you can withdraw funds from your bank accounts, the debit card is similar to a pre-paid card. However, it has the advantage of building credit if it is linked to an existing credit line.
Paying minimum credit card payments
Young adults can help build credit by making minimum credit card payments. Young adults often have limited credit history and income so the options are limited. Young adults should aim not to have more than 30% credit and pay their bills every month.