How does your credit score factor into your life as a teenager? Are there ways to ensure you’ll have an acceptable credit score by the time you’re ready to borrow? In this tip, we’ll share a list of ways you can start building your credit score as a teen.
Links:
Visit Credit Karma to start watching your credit history
Learn more about Triangle Teen Club accounts and their benefits
Follow our Facebook, Instagram and Twitter pages!
Learn more about Triang...
How does your credit score factor into your life as a teenager? Are there ways to ensure you’ll have an acceptable credit score by the time you’re ready to borrow? In this tip, we’ll share a list of ways you can start building your credit score as a teen.
Links:
- Visit Credit Karma to start watching your credit history
- Learn more about Triangle Teen Club accounts and their benefits
- Follow our Facebook, Instagram and Twitter pages!
- Learn more about Triangle Credit Union
Transcript:
Welcome to Money Tip Tuesday from the Making Money Personal podcast.
Your credit history is something that follows you throughout your life, regardless of when you start building your credit. A great credit score can help you buy a car with a low interest rate or even an affordable house when the time comes.
The same sentiment can be said for poor credit. Poor credit can lead to financial hardships in the future by making it nearly impossible to borrow money if you were to need it.
The conundrum is: to build credit you typically need credit in the first place. As a teenager, this can be frustrating because it may seem like you are just thrown to the wolves when it comes to your financial future.
We don’t want you to feel that way. You should start your financial journey feeling motivated and inspired, which is why we put together a list of the top 5 ways you can build credit as a teenager.
The first way is to use a secured credit card.
A secured credit card functions like a standard credit card; however, with a secured card, the credit line is based on the upfront cash deposit.
A typical cash deposit for a secured credit card is usually between $200-$500.
Since this card works like a traditional credit card, it’s important to note that interest will be charged on balances that are not paid in full each month.
A secured credit card is a great option for teens because the card does not typically require credit history when you apply for the card and once the credit is built up a bit, the secured credit card can usually convert to a regular unsecured credit card, which will allow you to continue adding to your credit history instead of losing it.
As a teen, a secured credit card will teach you the importance of making on-time payments, paying the credit card balance off in full to avoid interest charges, and teach you how to monitor your credit within the credit card app.
The second way is to become an authorized user.
If you are a teenager listening to this, sit down with your parent, guardian or relative to discuss becoming an authorized user on one of their credit card accounts.
Becoming an authorized user on a credit card is a great way to start building credit if you are not old enough or able to apply for your own credit card. Essentially, as an authorized user, you’re able to piggyback off their good credit; as they make on-time payments and keep their credit in good standing, your credit will increase as well.
If you are a parent, guardian or relative of a teen who could benefit from this, discuss this as an option, but make sure your teen understands how it works, and your expectations of spending limits and responsibilities for paying off any amounts charged. It’s very important to have the guidelines set of how your teen will pay for the purchases they make every month so that monthly payments are made on time.
It is also very important to understand that this will affect both people’s credit so if the main account holder does not already have great credit, this might not be the right option for you.
The third way is to start working.
Getting a job as a teenager is an important step in the credit building process.
Income is one factor that contributes to qualifying for credit because credit card companies, auto loan providers and property owners use income, along with a credit score, to determine if you can pay the bill, loan or rent.
These servicers will understand that you will only be working part-time while in school but getting a job as a teenager can help you establish a good work ethic while also providing you the money you’ll need to start saving for your financial future.
The fourth way is to open a checking and savings account.
Opening a checking and savings account as a teen helps establish a strong foundation for your financial future!
Although checking and savings accounts do not directly affect your credit score or show up on your credit report, properly managing these accounts will teach you how to handle your money and will lead to healthy financial decisions as you get older.
Triangle Credit Union’s Teen Club Checking and Savings Accounts provide you access to a personal finance manager, online and mobile banking capabilities, a high yield online savings account, and a contactless Visa debit card for your checking account.
These accounts are perfect for 13–18-year-olds who want to build credit because with a co-signer, you can apply for a low fixed-rate 24-month personal loan up to $400.
The fifth way is to sign up for a free credit monitoring app.
Carefully watching your credit report may not seem like a big deal when you’re a teen, however it’s crucial to understand how every part of credit building works.
Signing up for a free credit monitoring service, like Credit Karma, allows you to track your credit building progress while also monitoring your report to make sure there are no fraudulent or derogatory marks on your account.
It would be a bummer for your credit to be ruined before you even had the chance to start building it yourself, but it would be even worse for your credit to be ruined and without you having any idea about it because you weren’t monitoring it.
We hope these tips give you peace of mind and help you figure out a starting point for your financial future. You don’t have to follow every one of these tips to be successful. Everyone deals with finances differently and it’s important to choose the ones that will benefit you the most.
If there are any other tips or topics, you’d like us to cover, let us know at tcupodcast@trianglecu.org. Like and follow our Making Money Personal FB and IG page and look for our sponsor, Triangle Credit Union on social media to share your thoughts.
Thanks for listening to today’s Money Tip Tuesday and be sure to check out our other tips and episodes on the Making Money Personal podcast.
Have a great day!
