What High-Schoolers and College Kids Need to Know About Credit

A group of students taking a test in a classroom.

Companies are aggressive when it comes to marketing to teens celebrating their 18th birthday or heading off to college. Is your kid ready to tackle credit without you present to make financial decisions? If not, it is time you prepare your high-schooler or college kid for credit. Here are the things they must know about credit before going off to college or applying for their first card.

Budgets are a Must

High school kids and college kids don’t have a lot of money to spend, but they must keep track of what does come in and go out. The first step to tracking is creating a budget with your teen. Then you can teach your child how to track the spending. Kids spend blindly, which means parents are left with the bills at the end of the month. Help your teen learn how to create a budget and manage spending before you send them off to college. Free online and mobile banking services tied to a UNITY checking account help teens keep track of their cash.

Employability is Tied to Your Credit Score

It may not sink in right away, but kids need to know that their employment after high school and college is tied to their credit score and their credit report. This is a lesson that will probably resonate more with college students than high school students, but it doesn’t hurt to compare the employment – or lack thereof – options with good credit and bad credit.

A young couple sitting on the ground with books in their hands.

5 Factors Influence Your Credit Score

Not many adults know exactly how the reporting agencies track and determine credit scores, which means teens know even less. The five factors that affect a credit score are your payment history, amount of debts, the types of credit account you have opened, inquiries for new credit, and the length of your credit accounts. So, the more accounts you have, the more you owe, and the more you fall behind and miss payments, the worse your credit score is.

You Can Build Credit Slowly

When teens turn 18, they don’t have any credit, which isn’t exactly the same as having bad credit. Having no credit does, however, mean a young adult needs to take steps to establish credit. They can do so with a secured credit card. Secured credit cards allow young adults to make a deposit on a credit card, which has a low spending limit, and make payments to pay it off quickly. The secured credit card helps your teen budget, control spending, and build credit with little risk. But, credit cards that aren’t paid back, or if they are maxed out, can have the exact opposite effect.

Savings Protects Your Credit

Every man, woman, child, and teen needs to know how to save. The fact is, most people aren’t saving. Almost half of Americans would struggle to come up with $400 in a pinch, according to the Federal Reserve. As incomes stopped growing, people went into deeper debt, and spending climbed, savings tumbled. When people don’t save, they can end up with deep financial troubles, especially young adults. Open a savings account and teach a teen to save, if even just a little money, so they develop a savings habit to protect themselves from future challenges that can wreak havoc on their credit.

Parents, teens, and young adults need to know they have resources at their disposal. OneUnited Bank has financial literacy tools and products to ensure high school kids and college kids are off to a good start when they apply for their first credit card or head off to college.

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