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Establishing Credit at a Young Age Set Your Kids up Right
Jan 22, 2024
Credit expert Shonda Martin discusses the importance of establishing credit at a young age and the benefits of adding children as authorized users on credit cards. She explains the requirements for obtaining a FICO score and highlights the long-term effects of credit history over a high credit score. Shonda also provides valuable insights on credit card closures and managing credit utilization, emphasizing the significance of maintaining open accounts. Don't miss this insightful conversation on navigating the nuances of credit scoring!
10:08
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Quick takeaways
- Adding children as authorized users on credit cards at a young age can establish their credit profile by 18, giving them a head start in building good credit history.
- Timing is crucial when closing credit cards, with recommendations to close cards with annual fees or no value after obtaining another card, and to create usage on inactive cards to prevent closure by the bank.
Deep dives
Importance of Establishing Credit at a Younger Age
Establishing credit at a younger age is crucial for building a solid financial foundation. By adding children as authorized users on credit cards from the ages of 16 to 17, they can have an established credit profile by the time they turn 18. This gives them a head start in building their own credit history and can provide access to better credit card offers compared to starting from scratch at 18. It is important to apply for a credit card before a student loan and to prioritize credit card usage for establishing credit age, as credit cards can remain open indefinitely, unlike loans that eventually reach their term date.
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