These days, mounting student loan debts and changing credit regulations aren’t doing young folks any favors. For them, building up credit history is a challenge, one that often puts major life expenses (like a first car) on hold. Even if your son or daughter was denied previously, there are ways they can contribute to their credit history. Here are 3 tips.
1. User Authorization: One of the easiest ways young adults can build credit is by becoming an authorized user on a parent or guardian’s existing card. Most credit card companies will include the payment history of the parent on the authorized user’s report, so this is a simple method to jump-start good credit. It’s also less troublesome to remove someone as an authorized user, rather than removing a co-signer from a new card.
2. Secured Cards: Another option would be to apply for a secure line of credit, which won’t go higher than the amount you deposit to the issuing bank. Concerned about overspending? Follow the 30% rule: charge no more than 30% of income – 10% or less is ideal. If you can get a secured card that reports to all three credit bureaus, all the better.
3. Small Installment Loans: When taking out a student loan is unavoidable, build credit and minimize potential debt damage by applying for federal loans only – these are generally safer, with fixed interest rates and more flexible repayment options than loans from privately funded lenders. Likewise, other loans with smaller installments, such as auto or personal, will help establish credit history.
Source: LA Times
Leave a Reply