Image Credits: Pexels
It’s never too late to fix your credit.
However, the scene can be slightly different if you deal with an account your whole family manages.
You can no longer work individually towards building your credit profile. Instead, you must ensure every family member is on the same page.
Because otherwise, all your efforts will be in vain.
In fact, even if you don’t have a joint family account, it’s equally vital for every family member to learn the importance of credit.
Here’s why:
Why Is Credit Important For Your Family?
Image Credits: Unsplash
Good credit equals high potential.
One can fully understand the power it holds during mortgage, auto loan, or house applications.
- A good family credit can help teens move out and land affordable student loans.
- It can also help young adults utilize the perfect credit history of their parents in renting out apartments.
Moreover, your children can benefit from good credit if they become authorized users or cosigners on your account.
However, all this is only possible if everyone at home adopts good financial practices.
Imagine you signed your 21 years old as a cosigner, but he doesn’t know how to use credit wisely. So, in the end, it will only make things harder for all of you!
How To Use Credit Wisely?
Image Credits: Pexels
Secured credit cards have become a dire need for people with bad credit, like young adults, teens, and college students.
In fact, it won’t be wrong to say as soon as children turn 18, parents allow them to get their personal credit cards.
Yes, that’s a good step towards setting your credit early. However, here’s what can go wrong with it:
- Irritational financial decisions will quickly acquire a heft debt amount,
- High debt will increase unpaid credit bills,
- The outstanding balance can then affect their credit history,
- Which can reduce their credit score immensely.
Hence, the chances of getting better student loan terms are also affected.
Moreover, if you’re a cosigner on their card, their bad credit decisions may also badly impact your good credit profile.
So, here are some credit tips to avoid credit risks:
4 Best Credit Tips For Your Family
Image Credits: Pexels
Everybody wants affordable mortgage interest rates, lower insurance prices, and flexible loan terms.
However, achieving the goals mentioned above is almost impossible with bad credit.
So, let’s teach you some tips and tricks that can help you build your family credit:
1. Learn Money Management
Your first step towards building family credit should be improving your financial literacy.
- Educating yourself and your kids about money management can help clear endless financial myths.
- You can learn to read and understand credit reports earlier,
- Moreover, it can help you create a better budgeting plan for your income.
Learning about money is the best way to deal with it expertly.
According to the FTC (FCA in Canada), people who are financially literate at an early age can build good credit scores when they become adults.
2. Understand Debit Vs. Credit
Teens are used to spending their parents' money as they don’t have a job or any stable income resource.
Yes, that’s understandable.
But have you heard the phrase: “bad habits take longer to break!”
- Make your kids understand the difference between credit and debit cards.
- Teach them how credit cards require wise and smart financial planning.
Because otherwise, credit cards will become a curse for your family!
Here’s a short video to understand the concept:
3. Incorporate Credit Reporting In Your Life
Surely, all parents are fully aware of the importance of reading your Equifax credit report, as it can save you from scamming and other financial troubles.
But do your kids know the concept? Of course, you can’t expect an 18-year-old to understand the complex credit card terms.
However, that doesn’t imply you leave them be!
- AICPA recently shared the survey results that one in three people never cared to check their credit reports.
- What if your kid becomes that one person?
That too earlier in their credit journey? Yes, not a good idea!
So, you, as a parent, are obligated to teach them how vital their credit report is for their future financial stability.
See: Money Goals For Your 20s, 30s, 40s, 50s, & 60s!
4. Be The Best Example
Kids learn from their parents!
If you aren’t paying your bills on time or using a credit card like a noob, your children aren’t going to be the Angus Watt or Seth Allen of the financial world.
- Practice good money habits,
- Learn to talk to lenders,
- Know about the types of lenders,
- Create effective budget plans,
- Clear debts and pay timely,
- Find passive income ways,
- Avoid signing up for multiple cards at a time,
And do whatever you can to make yourself the best credit advisor for your kid.
It will be hard for your family to challenge your decisions or ignore your financial advice if they see how well you’ve managed your money.
4 Credit Strategies For Your Family
Image Credits: Pexels
Okay, enough with the tips and tricks now.
It’s time to take you on a roller coaster ride of some credit strategies that can help you build your Equifax credit score like nothing else.
1. Keep The Cards To A Minimum
Sure, you need more cards to build more credit, as constant credit reporting will work in your favor.
But is applying for new cards a bad idea? Well, it can be!
That’s why you should strategize your applications. Want to know how? Let us enlighten you:
- Take at least a 3 or 4 months gap between your credit card registration,
- Pre-look at the requirements of the card you choose,
- Compare the cards for the best terms.
The key is to find the card best suited for you and apply for it after checking in with their eligibility.
2. Open Credit Reporting Accounts For Your Kids
The earlier you start, the better your credit will be. That’s a given! No Cap!
However, you can’t make your kids jump right into the credit world without preparation because they’ll only suffer.
Here’s what to do:
- Create utility accounts: Start by opening utility accounts under their name and then sign up for the credit reporting service. It will help them build a credit history.
- Talk to the rental company: If they recently moved out, you can talk to the property owner about credit reporting. The timely payments will be good for their credit profile.
- Internet bill reporting: Telephone or cellphone packages and internet billing can benefit them if reported to the credit bureaus. So, make sure that they purchase a service that offers credit reporting.
You have no idea how these little tips and strategies can help your family in building a good credit profile overall.
Bonus Tips
Here’s a bonus section before finishing this comprehensive guide:
1. Communication Is The Key
You can’t expect a young teen to digest all the information in one sitting fully.
Patience and consistency should be your best friend while dealing with your kids.
Otherwise, you might have to face a fussy adamant of making bad financial decisions just because of your bad judgment.
2. Start Slow & Build Your Pace
Take one step at a time!
As we explained earlier, start with financial literacy, then slowly introduce new concepts.
If you want to teach them everything you learned from all your life experiences, that’s straight-up fantasy.
Yes! Parents can sometimes be too impatient with their kids. And when you are building credit as a family, that’s the last thing you want!
Bottom Line
Do you want to kickstart your savings?
Need to build a good credit profile?
Do you wish to create a joint family account that can give easy access to help your spouse and kids with money?
We got you!
Credit building is important for every family member!
When you find the right mortgage deal, you never know what comes your way. So, it’s only wise to prepare your family along with you on your credit journey.
Intriguing much? This guide has all your answers!
