DR. ROBERT WALLACE: Twenty-something is looking for solid credit | New
DR. Wallace: I’m 20 and wondering if it’s time for me to get my first credit card. My parents always advised me against getting any kind of credit card because they feel that many young adults get into debt using high interest credit cards and spending way beyond that. of their means. However, on the other hand, my friends and colleagues keep telling me that I need to establish a credit score if I want to plan for my financial independence soon.
There seems to be a lot of conflicting information online about whether getting a credit card is a smart move. I’m good at exercising self-control, so I don’t mind spending more than I can afford if I were to get a credit card, but some finance gurus like Dave Ramsey strongly advise against it, and my parents seem to fall into this camp as well. I don’t know what to believe and decide for myself. Any advice you can give me would be greatly appreciated! – Now a young adult, via email
NOW A YOUNG ADULT: There are several ways a young person can build a credit score, all of which involve creditors reporting bill payment details to the three major credit bureaus.
Yes, getting your own credit card can certainly help in this regard, but also comes with risks. One risk is overuse and spending beyond your means, and another common pitfall is missing a payment due date. To avoid the latter, register online for the automatic minimum payment due service. If you opt for a credit card, only do so with a very small line of credit so you don’t go over it.
However, almost the same benefit can be had by being added by one or both of your parents to a credit card account they already have. This only makes sense, of course, if your parents have a good credit history themselves. In this case, you would be listed as an “authorized user” on their account. And to make sure you get the most out of it, make sure the credit card issuer is the one reporting “authorized user” activity to the credit bureaus. Some do, some don’t, so do your homework here before going ahead with this option.
Another strategy is to take out what is called a “credit enhancement loan”. Some lenders offer specially designed loans to help borrowers establish credit with their institutions. These entities estimate that if they help young people build their credit, a percentage of them will retain that same institution as a longer-term customer, with the added benefit that the company knows that these young people are interested in establishing and develop good credit ratings. . These upfront loans require the borrower to pay interest on the borrowed funds, but this is usually a small price to pay in exchange for building a good foundation for a good credit rating.
Another idea is to pay your own cell phone, streaming, internet, or even utility bills as much as possible given your circumstances. Again, make sure these service providers add your name to their reports to major credit bureaus. Once you can establish one or more of these recurring payments in your personal credit report, your payments will gradually and steadily improve your credit score and build up your history. Just make sure you make all payments on time!
DR. Wallace: I am a grandmother, not a teenager, but I still hope you will consider my letter. My eldest granddaughter is now 20 and has a one and a half year old daughter. I recently discovered that she had given her daughter the surname of the father involved in her procreation. I am convinced that since they are not married and do not live together, my granddaughter should name her daughter using her maiden name as that granddaughter’s surname.
I want to tell him something about it, but so far I’ve resisted the temptation and thought I’d write you a quick note first to get your thoughts on the situation. If you were in my place, what would you do? —Grumpy Granny, via email
Grumpy Granny: My advice is to remain silent on this issue and openly support your granddaughter and great-granddaughter. What matters most is the health and well-being of this little girl, not the last name that appears on her birth certificate.
Your letter also doesn’t mention the type of relationship your granddaughter has with her baby’s father, even though they don’t live together. At the age of 20, she could still plan a life with him. And even if not, she has every right to decide what surname she would like her child to have.
Later in life, your granddaughter or great-granddaughter will have plenty of time to change that granddaughter’s name if one of them decides to do so. Now is not the time to stir up trouble, despite your strong feelings about it. I can understand where you’re coming from, but I’m firm in my advice that you should respect their choices. Focus now on doing your best to help them in any loving way you can as they both grow and begin to navigate life as mother and daughter.