As parents, we play an important part in shaping their kids' attitude and beliefs towards money. Though, it is not always easy to talk to teenagers on the brink of adulthood, let alone about a sensitive topic like money- a few things practiced early on can go a long way in honing your child's confidence and financial sensibilities.
Here are 9 easy ways to do it- all it takes is consistency.
#1 Automate it
The easiest and the most obvious way to raise credit score is to not miss any payments. Since payment history comprises 35% of the credit score, it is extremely important to automate it and set up payment reminders in order not to miss a due date. Also, paying on time consistently goes a long way in bumping up your credit score. Set up monthly reminders. Even simple phone reminders will do.
#2 Split those payments
Because paying on-time is important, most of us wait for the due date to make our payments. However, the report date( the date when our credit gets reported to the bureau) is different than the due date. Making at least part of the payment before the report date helps report lower credit on your accounts- which in turn raises the credit score. Encourage your child to schedule payment at least twice a month that is appropriately timed with the report and the payment due dates.
#3 Consider paying off student loan on a credit card
Student loans typically have lower interest rates than credit cards. However, if you see a possibility of paying it off early and not prolonging the student loan, it makes sense to use a credit card to pay it off(in case it is accepted) - simply for the fact that you will be paying that off anyway. Making regular payments on your credit card can spike up your credit score, so why not use it to build a robust credit history for the future?
#4 Maintain a healthy debt-to-credit ratio
The ideal debt-to-credit ratio is at 30%. Though it is tempting to use up the credit limit; making a habit of watching the debt-to-credit ratio is a good habit to cultivate even from student days. Lower the credit utilization rates by doing one of these...
#5 Request an increase in credit limit
Once they have paid off their debt to a considerable degree, it is safe to request for a increase in credit limit. The improved ratio will not only reflect in her credit score immediately, it goes a long way in building a healthy credit history.
#6 Juggle balance transfers
It's not just a nuisance to have balance dues in several cards, it can also severely affect your credit score. One of the criteria on your score calculation is the number of cards on which you have outstanding balance, so if you have small amounts on multiple cards, it makes sense to just transfer them all to one card and pay it off.
#6 Obtain Secure Credit cards and actually use them:
Help them obtain Secure credit cards that can help with monthly utility payments of gas and groceries are a great way to help build credit history. As long as their spending never goes off-mark and stays within the limit, it's always a good idea to use a credit card even for everyday payments.
#7 Add them on
Add your child(ren) as authorized users to your credit cards, preferably on the ones with high credit limits. If you want to be doubly careful, add them as an authorized user without actually giving them the card for use. In case of a late payment, you dont want your credit history to take a dent.
#8 Watch the Credit Report
According to some statistics, 1 in every 5 Americans faces an error or inaccuracy in their credit report. Request for the credit report frequently and monitor them. Any mistakes can be disputed online via Transunion, Equifax and Experian.
#9 Talk about it
Establish a monthly routine to get together and discuss budget. This practise is not only an effective way to avoid unpleasant surprises, it's a great way( and excuse) to bond with your teenager.
The author is the founder of www.kidskintha.com; a website dedicated to raising Happy children. She beleives that happy children can only grow around happy adults.