Diane Steffen, Assistant Vice President NLMS #506343

Publish Date July 8, 2019

As young adults go off to college, there are many details to consider, such as how much stuff they will actually fit into a tight little dorm room. Unfortunately, one thing many do not think about is their credit score. When children leave the nest, however, it’s the perfect time to teach them about building credit responsibly.

“Your credit score is extremely important to your financial future,” says Diane Steffen, Assistant Vice President NLMS #506343. “Not only does it help build the base for future financial success, it can help young adults get approved for loans and receive approval to rent an apartment. Additionally, employers may check an applicant’s credit when making hiring decisions.”

A good credit score is generally higher than 730, but the average credit score for people ages 18-24 is a full 100 points below that mark. That’s because oftentimes when children receive credit, they don’t use it responsibly, causing their credit scores to dip. How to use credit wisely is a lesson all young adults should learn.

Building positive credit history with plastic

The best way for a young adult to start building credit is by obtaining a credit card. If your young adult child has a checking or savings account with Fidelity Bank & Trust, then that is the first place they should look when choosing a credit card. If his or her account has been maintained, they will be more likely to receive approval. The Credit Card Accountability, Responsibility and Disclosure Act of 2009, however, requires anyone under age 21 to have a qualified co-signer to be approved for a credit card.

“Start early,” says Diane Steffen, Assistant Vice President NLMS #506343. “The longevity of credit cards is extremely important and opening and closing your cards can have a negative effect on your credit score.”

If a co-signer cannot be obtained, there are other options to consider:

• Secured credit cards: Offered by Fidelity Bank & Trust, secured credit cards do not require a co-signer as the credit limit is determined by the balance deposited in an interest-bearing savings account.
• Authorized users: Parents can add their children as an authorized user to their credit cards. This may be a good option for those who want to monitor their children’s spending to ensure that they don’t get carried away. Keep in mind that if the parent misses a payment, this can negatively affect the young adult’s credit score.

Education Is Key

For young adults going off to college, education is clearly a priority. Parents can help ensure their children are educated on the importance of building credit and spending wisely by sharing these tips:

• Pay off balances each month: Paying off balances in full each month does two things. First, it helps build a history of making responsible payments, and since most credit cards can be paid online or allow payments to be scheduled in advance, it’s easy to make sure payments aren’t missed. Second, it saves you from paying interest.
• Practice responsible spending behavior: The greatest advantage that having a credit card provides college students is that it helps them build a credit history. That history can be positive or negative, depending on the user’s spending habits. Only using the credit cards a few times each month and never for more than what they are able to pay will keep that credit history moving in a positive direction.
• Review your credit report: There are three nationwide credit reporting agencies — Experian, Equifax and TransUnion. It is important for each adult to review their credit history. Ordering free annual credit reports from www.annualcreditreport.com will help ensure that there are no mistakes in your credit history.

Contact Fidelity Bank & Trust at 800-403-8333 to learn more about helping your children build positive credit as they move into adulthood.