Real Estate News with Terri Taydus, AHWD, CNA, CRS, GRI

Let's Talk About Kids and Credit!

September 29th, 2014 4:01 PM by Taydus Taydus, AHWD, CNE, CRS, GRI

 


One of the best gifts you can give your children as they enter the real world is an excellent credit score.

The credit score impacts the interest rates that they will pay for financing items such as autos and homes, what they will pay for health and homeowners insurance, and it can even impact their employment opportunities.

I cannot tell you how many young professionals that I see, even ones with business degrees, who have no established credit.

No matter how much you make or put down you CANNOT buy a house without a credit score except on a FHA loan where they will accept alternative credit such as copies of Xcel, Verizon, and other established accounts.

Just like everything else in the world of lending it is getting harder and harder to establish credit.

You now have to be 18 years old before you can apply for a credit card.  On most cards you need to show some form of employment.  An alternative to a conventional credit card is a SECURED CREDIT CARD.  A secured card is one where you make a deposit into the Bank and secure the new card against the deposit.

After 12 months you will be surprised at the number of invitations that you start getting in the mail for new credit cards.  Like so many other things the first card is the hardest to get.

I suggest getting a second card at the age of 19 and a third card at the age of 20.  You want to have 3 active cards or trade lines to optimize your score.  You need to request a credit limit of at least $500 to start.  Less than $500 may not impact or help your score.

You want to use the card up to 50% of the limit ($250) and then pay it off each month in full.  You do not have to actively use all the cards and may elect to use 2 of the 3 or rotate the cards depending on spending habits, organizational skills, and use of the cards.

A Debit card or a card where you are an authorized user does not count towards your credit score.

For the first secured card I like to suggest USBank as they seem to be the most receptive to opening a secured account.

For future cards I suggest using major banks like Chase.  I believe that Chase is the largest issuer of credit cards and they do an excellent job of managing your account.  I like to suggest a Cash Back card or an airline card as additional incentive to get and use the cards. Stay away from gas or department store credit cards.

This information was provided by Joe Taydus of Mutual Security Mortgage here in Boulder Colorado.  If you have any questions regarding ways to improve your credit score, establish new credit for yourself or your young adult children, or about a home loan / refinance, please contact Joe directly at (303) 443-5575 or email him at Joe@MutualSecurity.com  Joe provides FREE consultations.

Posted by Taydus Taydus, AHWD, CNE, CRS, GRI on September 29th, 2014 4:01 PM

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