Helping Your Kids Achieve Their Dreams With Good Credit

My kids are young, but I’m already thinking about how I can help them get a head start on planning for their future.

•It takes more than paying your bills on time. Surprisingly, paying your bills on time makes up on 35 percent of your FICO credit scores, which are what lenders look at to determine credit worthiness. It’s important to teach your kids how the credit scoring system works.

Making mistakes can lead to long-term consequences, with negative activity staying on credit reports for seven to 10 years.

•Begin establishing credit worthiness at a young age. How long we’ve had credit makes up 15 percent of our credit scores. Consider getting your child a credit card as soon as they are eligible. Make sure you choose a major credit card that reports to all three credit reporting agencies (Equifax, TransUnion, Experian). List yourself as the primary user on the account but add your child as the co-borrower. But you don’t want to let your child use the cards. You use them and pay on time and build good credit for your child. Once each of your children has used their good FICO scores to establish their own good credit, you should be able to remove their names from the accounts at times where it won’t lower their scores dramatically. A good time for this might be after they purchase their first homes.Here’s what to ask your lenders:

•Do you report credit limits and timely payments to all the credit reporting agencies?
•Can I add my son or daughter as a secondary cardholder for this account?
•Do you review the secondary cardholder’s credit to make a decision?
•Will you report the account information for the secondary cardholder to all three credit reporting agencies?
•Is it possible to make the secondary cardholder solely responsible for the account when they turn 18?Asking these questions should get you closer to screening appropriate lenders to accomplish your goal.