Help Generation Z Make Good Credit Choices
Generation Z members are 65 million strong and rapidly coming of age. Their generational group born between the end of the 1990s and today is growing up, going to college, getting first jobs, and ultimately learning that credit scores count.
Have a young adult in your life who falls into the GenZ category? Help him or she avoid having to shop for a home or auto loan with bad credit in Cincinnati, Kansas City, Miami, or Seattle. How? Emphasize the following ways to keep an average to high credit score.
- Encourage teens and young adults to set up bill payment reminders.
An extremely fast way to build credit scores into the 600+ level is to always pay off invoices before the deadline. Sometimes, younger people who have never had to deal with bills before may not realize that late payments can hit their credit scores — hard.
Because Generation Z is so competent with technology, urge your son or daughter to rely on it to remind them of upcoming auto loan payments, car insurance payments, and student loan payments. It’s easy to put a tickler on a smartphone calendar, and it helps emerging adults get into a rhythm of always staying on top of their financial obligations.
- Help a Generation Z person get a credit card and then understand how to use it wisely.
We all know that getting a first credit card isn’t tough. Plus, it’s exciting to imagine all the things that can be purchased with a $1,000, $2,000, or even higher credit line! However, credit cards in unaccustomed hands can be a slippery slope to sudden and serious debt.
At the same time, a credit card is a useful way to build good credit. That’s why every young person needs to consider getting one to have. Besides, it comes in handy in the case of true emergencies, such as being stuck in a snowstorm and having to stay overnight at the nearest safe hotel.
Before your Generation Z family member chooses a credit card, have a frank discussion. Talk about the variety of ways that credit can be a positive thing, as well as how it can be negative. If your child is open to help, search for credit cards together that offer perks like bonus airline miles and travel points. These are great ways to ensure that he or she can come home if they move for work!
- Tell your son or daughter how to get a free credit report three times a year.
Every United States citizen enjoys plenty of rights, including the right to get a free credit report from Experian, Equifax, or TransUnion once a year. Yet most students are never taught this in school; instead, they have to learn it through their loved ones, like you.
Sit down with your teen and get a copy of his or her report for free. You can look at it together. If he or she doesn’t have one, you can always share your credit report to springboard a conversation about revolving and other types of credit.
Again, your Generation Z student can easily monitor credit every four months. This lessens the likelihood of any problems on the credit report that could lead to being turned down for an auto loan because of bad credit.
- Be open about your own budgeting systems.
Perhaps you didn’t realize how to keep up a smart budgeting system until you were much older. As long as you have one in place, or have vowed to make this the year that you get all your finances in order, you can be a mentor to your Generation Z kids.
Everyone has a different way of budgeting, but it all starts with the same premise: Your expenses cannot exceed your income. Period. If they do, you’re in a no-win situation because you’ll constantly rely on credit… and eventually, the credit line will end.
Ultimately, you and your child should be able to not only meet your financial obligations each month but have money left over for savings, contributions, taxes (if the income is high enough to be taxable and wasn’t paid by an employer,) and perhaps even a modest investment platform. Not only is this a solid money management strategy, but it provides a buffer in the case of unexpected bills that could otherwise cause fiscal chaos for a young person.
- Help your kid build credit by becoming a co-signer on a credit card or loan.
Is your child having trouble getting a loan because he or she has zero credit history? If you’re comfortable with the thought, you can always co-sign on an auto or home loan, or even a rental lease.
Not only will this help build your young adult’s credit, but it will show your good faith in wanting the best for him or her. Of course, you need to understand the risks associated with this action: If your child cannot pay monthly bills, you’ll be on the handle for them. In other words, you’ll need to have enough in your savings to cover any unpaid bills before they hurt both your credit scores.
This isn’t always the best answer for all families or situations, but as long as both sides realize it’s a means to an end and have a strong sense of trust, it can be a workable solution toward boosting credit.
Bad Credit Isn’t Forever, and GenZ Needs to Know That
As a final thought, you should always look on the positive side of things and help your Generation Z family member do so, too. Bad credit today might feel like a “forever” occurrence, but it doesn’t have to be. With pre-planning and thoughtfulness, anyone can gradually improve even the lowest credit score.
Upping your credit doesn’t happen overnight, and can take years depending on how long it has been flagging. Still, it’s worth being patient and taking the first step forward. And for Generation Z, it’s great to have a little advice and assistance along the way.