How Kids Build Credit

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Kids can build good credit by having a credit card in their name at a young age, making regular and timely payments and having a parent co-sign on a loan. Build up great credit from a young age to help out in future car or home purchases with information from a financial manager and currency trader in this free video on finance.

Part of the Video Series: Credit Information & Tips
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Video Transcript

I'm Roger Groh. We're here this morning to talk about how kids build good credit. Well, it really starts with the parent. Go and get your son or daughter a credit card in their own name. Make it small. Make it for two-hundred dollars or five hundred dollars, or a hundred dollars, and use it, and then be sure that that money is paid back on time. That data will be reported to the databases that track all individuals when it comes to payments, and when your son or daughter goes to borrow money, for something big or different...a car, or tuition. Whatever money...they'll receive a favorable rating. Thee other way to do it is that let's say that your kid is a little older now, and they're ready to buy a house, but they have never borrowed money before. Well, you'd want them to be able to borrow money on their own, so initially, you may have to guarantee loans to your children. The key here is make sure that the payments are made on time because after a year of doing that, or maybe two, depending upon the person and thee age, that kid will be then be able to go out and refinance that note that you are now on the hook for. As they'll have an established credit history, they'll get a terrific rate of interest as long as those payments have been made on time, and then you're out of the picture. So two ways: number one, start small. Get a credit card for them as an example. Make the payments on time. Number two is guarantee a loan, make the payments on time and then after a year or two, once they've built their credit, refinance it and you get out, you the parent get out of the picture, kid's have their own loans in their owns name, in their own names. That's how they get the best rate of interest. They build credit for kids. I'm Roger Groh.

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