For those hoping to finance anything from a home to a credit card, one’s credit score may become an important part of the process. When loan providers and other financial institutions review people to work with, the report can assure them of the individual’s trustworthiness with money. While minors can rarely develop these scores, though avenues do exist, the acquisition of decent credit will swiftly become necessary in early adulthood. The actions that contribute to this score include on-time payments on bills and the total credit debt an individual amasses.
Americans use credit scores in a multitude of ways, but they frequently find the information necessary when seeking a loan. Whether they hope to take out a mortgage or cash for college, banks will review any information they can about the individual’s history of monetary trustworthiness. While exact scores vary depending on the organization’s checking, all this information does boil down to a number between 300 and 850, which may leave those who recently emerged from difficult circumstances at a disadvantage when hoping to finance expensive, necessary purchases. This simplification particularly affects African Americans, who tend to possess lower credit scores due to systematic issues outside of individuals’ control and who face increased difficulty taking out loans even when studies equalize credit scores.
“The best way to acquire good credit is simply having a history of paying your bills on time and borrowing money and paying it back. As a young person, you can’t have a credit card in your own name until you’re 18, however, you can conceivably have a co-signed credit card under your parents. You have to have some kind of adult as a minor, and you have to borrow money. Just having the account doesn’t build up your credit, and just having bills, like a cell phone bill, doesn’t necessarily build up your credit; you have to owe someone cash,” Advanced Placement (AP) Microeconomics teacher Tara Sisino said.
The key to building credit for young people lies in avoiding biting into a slice of debtor’s food cake when their stomach — or purse — cannot accommodate it. While this task of keeping debt low and timely paid can lead to temporary struggle, such as a need to earn scholarships rather than take out student loans, minimal debt stress will help to maintain a manageable load over time. Unfortunately, simply avoiding debt together can improve a credit score only to the degree that avoiding practice can build a skill: not at all. Utilizing a minimal fraction of the credit available to a person and paying it off regularly will positively impact the score. Inexpensive purchases on a single credit card, for example, can help build a history of using and paying off debt without proving cumbersome. Even the simple act of paying other bills can contribute to improved credit.
For those who wish to monitor their credit scores without paying for a service, checking in with their credit card providers or non-profit financial counselors provides free options. Credit report websites may also provide annual reports for free. Ultimately, as teenagers grow into adults, their finances stretch to new heights of complexity. Staying on top of debt will only help a person’s credit, extending ease in the future.
