Establishing Credit at a Young Age: Set Your Kids up Right

0:00This is an iHeart Podcast. Guaranteed Human. Earners, what's up? Look, building wealth isn't just about making money. It's about knowing where your money is working for you. That's why we partnered with Empower. Empower is all about helping you invest well so you can go out and live a little. Their free Empower personal dashboard gives you a complete view of your financial life in one place. Track your net worth, monitor your budget, analyze your investments, set retirement goals, and more. You worked hard for your money. Now make sure it's working hard for you. Download the Empower personal dashboard or visit Empower.com.

0:37Not an Empower client paid or sponsored. They don't realize smart people use smartphones, huh? Seeing through BS they thought was going to slide. Download text now because it cuts out clownery. You can literally activate it from your couch. Nationwide 5G with the same towers the other companies use. Pay what you want or not at all. You're in control. Show these ridiculous carriers we ain't paying for stupid. Because we're way too smart to pay dumb. Free app-based talk and text via the TextNow app requires Wi-Fi or data connection. Data plans sold separately. 5G where available. When traveling for events or festivals throughout the country, every dollar matters.

1:16We compare flights, prices, hotel rates, and restaurant options. So why wouldn't we compare rides? Personally, I always check lift before booking a ride. Prices can change throughout the day depending on traffic, weather, and what's happening in the city. If you're headed to a concert, out to dinner, or catching up with your friends on a Friday night, taking a few seconds to check lift could leave you with more money to enjoy the experience. Save money. Check lift. Today's episode is brought to you by ChatGPT for Business. As a listener of this podcast, you're looking for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use.

1:53Chat GPT for Business can help. Chat GPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in Chat GPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using Chat GPT for Work. Download the Chat GPT desktop app or contact sales to learn more. There's an importance of having credit at a young age. Like you said, one of those factors is the credit age, right? And so if we're getting credit at 20, 23 years old, we've missed some years that we actually could have.

2:30So talk about the importance of establishing credit at a younger age. Maybe talk about authorized users and things like that. Yeah, absolutely. So for the parents out there, I recommend every parent, if you can, if you have a credit card that you know you're not going to pay late or whatever, with good history, I recommend to add your child at no later than 17. Now, if your child is 18, obviously you can add them. But adding your child from the ages of 16 through 17 will set them up for when they turn 18, they'll already have an established credit profile. Most people don't realize that you do not have a FICO score just because you turned 18.

3:08You have to have six months of credit history with at least two accounts before FICO will issue you a credit score, right? So as opposed to just starting at 18 and building your own credit, if you have a parent, a responsible parent that will put you on their credit card prior, at least six months prior to your 18th birthday, you'll already start off a little ahead of the pack. So as opposed to getting those entry-level credit cards, sometimes you can get quality offers because it's really easy to get a 700 credit score, especially if you have no collections or you haven't messed up your credit yet.

3:39It is super easy to get 700. So adding, if you have the opportunity to be an authorized user on a family member's card, and if you share an address with them, it's better because nowadays the anti-abuse laws affects trade lines, authorized users. And so if you have the same address or the same last name, you'll be more credited for those accounts, right? Or for the, yeah, for the authorized user accounts. setting um once you turn 18 though because this is the mistake a lot of parents make they'll put their child on their credit card at like 15 16 whatever and then whenever they turn 18 the child will have like a 700 credit score and as opposed to making the child or having the child apply for their own accounts they just kind of lean on lean on lean on mom's card or mom's credit history and think that it's going to take them far and that's where they run into the situation of having a high credit score, but not a lot of credit, not a worthy credit borrow wing, right?

4:40So you need to make sure that when that child turns 18, like my children, on their 18th birthday, we're going to be applying for a credit card. On their 18th birthday, because the earlier, the better. Apply for a credit card, please apply for a credit card before a student loan. That's just like a side note. That's one of the things, that's one of the mistakes that I wish that I can catch with a lot of people. Having a credit card be your first established account, your credit age is going to be reliant on that account. The great thing about credit cards is they can be open forever. Like there is no end date to a credit card unless you choose to close the card or the bank chooses to close the card.

5:19Whereas a loan, every loan has a term date. Every loan will end eventually. So when your credit age is based on a loan, once that account closes, yeah, your credit age is going to be affected drastically, right? So if you have your first established account as a credit card, that's sort of like a safety blanket for your credit age. And so make sure at 18, apply for a card. It can be a secure card. It can be a subprime card, whatever. Apply for a credit card and then start to build your own credit history because authorized users can only take you so far and not very far nowadays. Just a quick follow-up because you did bring up closing cards and I know a lot of people as they're trying to fix their credit are like, all right, well, I paid it off.

5:58let me close it. Talk about like how that could negatively affect your score as well. Yeah, it could. My rule of thumb when it comes to closing credit cards is if you have, if the credit card has an annual fee and you're not getting any increases and it's just not worth it to keep it, there will be, there will come a time where you'll probably want to close that card. When you close that card is super important. Number one, if you are applying for anything, any large purchase like a car or home within the next six months it's not the time to close that card close it after you you get your car your home whatever um you the only time I would suggest you closing the credit card is if you know if you know like I said six months free of any applications um and also make sure that you have another card before you close that card like do not like I see people all the time like I just hate this card I want to close it etc and it's just like that's going to do more harm than good I have a$200 capital one card that I've had since college, that card is still open.

6:57I haven't gotten an increase in years. I don't even care to use the card. I keep it open specifically because credit age. An aged credit card is the most beneficial thing that you can have on your credit report. Like the most. And it's one of those things that's like the gift that never stops giving because every single three to six months that a card ages, it's going to add more to your credit age and also your FICO points. So keep that in mind. So don't close a card unless you have to. If you have a card that you don't use, put a subscription on it. I have Netflix. Like, pick one of your subscriptions that you probably have coming out of your bank account.

7:35Assign those to each of your credit cards so that it can have usage so the bank will not close it due to non-usage. So what about putting your child on the credit card as a child? Yeah, so one of the things that people think that makes a difference is if they add their child at like 12 or 13. That doesn't make it, regardless if you add your child at 12 or if you add them at 17, it will not make a difference in terms of the effect that it will have on their credit reports. That's a misconception. However, me personally, I would suggest, like I said, adding your child at like 17. when you when someone asks their child at 13 to me it just that's a that's that's what seven years seven eight years until they turn 18 and that's a lot of room it leaves a lot of room open for a mistake what happens if you get a lay payment on their card and now your child's credit will be affected before they can even establish credit so you we never know what can happen right so I just I have for I just recommend out like I'll personally I'm adding my children when they turn 17.

8:38As long as you have six months before they turn 18, they're fine. I was a beneficiary of that. So I was added to my mom's, I told this story before, but I was added to my mom's American Express card at 17. And so now even when I get the card, it'll say member since 85, even though I was born in 82. We talk a lot about ownership and one of the most important assets you can own is your digital real estate. Too many entrepreneurs rely on social media platforms they don't control. Your website should be the center of your business. Framer helps you build a professional website without all the friction.

9:12It's more than a website builder. It's a complete website platform. Your entire team can collaborate in real time, make changes instantly, and publish updates in minutes instead of days. Framer's AI agents work alongside your team to create content, refine pages, manage your CMS, and optimize your SEO all in one place. And because everything stays editable on the same canvas, you maintain complete control over what goes live. That's why everyone from startups to Fortune 500 companies and brands like Perplexity and Miro trust Framer to power their websites. Learn how you can get more out of your site from Framer specialists or get started building for free at framer.com slash earn for 30 % off a Framer Pro annual plan.

9:57That's framer.com slash earn for 30 % off. Framer.com slash earn. Rules and restrictions may apply. They don't realize smart people use smartphones, huh? Seeing through BS they thought was going to slide. Download TextNow because it cuts out clownery. You can literally activate it from your couch. Nationwide 5G with the same towers the other companies use. Pay what you want or not at all. You're in control. Show these ridiculous carriers we ain't paying for stupid. Because we're way too smart to pay dumb. Free app-based talk and text via the TextNow app requires Wi-Fi or data connection. Data plans sold separately.

10:325G where available. When traveling for events or festivals throughout the country, every dollar matters. We compare flights, prices, hotel rates, and restaurant options. So why wouldn't we compare rides? Personally, I always check lift before booking a ride. Prices can change throughout the day depending on traffic, weather, and what's happening in the city. If you're headed to a concert, out to dinner, or catching up with your friends on a Friday night, Taking a few seconds to check lift could leave you with more money to enjoy the experience. Save money. Check lift. Earners, what's up? Look, building wealth isn't just about making money.

11:07It's about knowing where your money is working for you. That's why we partner with Empower. Empower is all about helping you invest well so you can go out and live a little. Their free Empower personal dashboard gives you a complete view of your financial life in one place. Track your net worth, monitor your budget, analyze your investments, set retirement goals, and more. You've worked hard for your money. Now make sure it's working hard for you. Download the Empower personal dashboard or visit Empower.com. Not an Empower client paid or sponsored. But my credit history goes back that far. So it's over 37 years.

11:44So every time I get a new card, it gets averaged into that. And so I think when I... Dang, that's a blessing. It was a blessing, and it's still a blessing, actually. I still have the card. Because I just want that history. Oh, for sure. Because that 37 years plus a one, the average day, it makes it like 16 years of credit age. So I'm like, that works perfectly. And American Express is a huge relation bank. Like, man, having a long-standing relationship with them, you can get anything. This is true. We talked about the number 700, and it's key. And I don't want people to, you know, some people may not have a 700, but it feels like that's the goal.

12:19but there are people like what are the numbers that in the range that people should be trying to get to 700 750 i know we got some 850s out there yeah so i'm a little different when it comes to credit scores right because i know the scoring model and how how much your credit profile matters most people don't believe me when i say i had over a hundred thousand dollars in credit card limits before my score was 700 right and it was simply because i learned how to set up my credit profile that will, that far past my credit score. There's a lot of times, there's a lot of people who have over 700 and still can't get approved for over$10 ,000,$20 ,000, right?

12:59Because their borrowing power does not match their score. So I don't ever recommend a specific score. What I will say is, like I always say, a healthy profile will translate. If you, people need to focus on their credit profile more, meaning making sure you don't have any late payments. If you do have late payments, try to rectify those. If you have collections, try to rectify all of your credit issues. Make sure that you have at least four accounts open at all times. After you began to build credit, there should never be a time where your credit profile goes below four open accounts. Anytime, you can have an 800 credit score.

13:40If you do not have at least four accounts open, any application that you do, you're going to get what's called an empty profile penalty, right? And we don't see this as consumers. We can't see this on our credit score or our credit report. However, when it comes to lenders and how our credit reports are assigned and how they translate over to their system, if you have less than three accounts open, four accounts open, then regardless of your score, you automatically penalize. You're automatically moved down to a lower tier of borrowing power multiple tiers rather so that's going to be more important making sure you're not applying um for an like let's just say an american express card if you have just opened up two other credit cards in the last six months right um so those are the things that speaks more to like your approval now when it comes to score if i had to say i would say 680 and above you pretty much with a healthy profile you pretty much can get anything 680 okay 680 and it's super and the thing is it's so and i know this probably sounds far-fetched to a lot of people but it's so easy to get a 680 like i actually tell people if you don't have at least a 650 then usually one or one of three things are the case you had a recent collection within 18 months a recent lay payment within 24 months um or you have high utilization because as long as you don't have those you at least you should at least have a 650 just in terms of how your credit scores, how our credit scores are allotted.

15:37Thank you.

16:07Thank you.

16:37Thank you.

17:07Thank you.

17:37Thank you.

18:07Thank you.

18:37Thank you.

19:07Thank you.

19:37Thank you.

20:07Thank you.

20:37Thank you.

21:07Thank you.

21:37Thank you.

22:07Thank you.

22:37Thank you.

23:07Thank you.

23:37Thank you.

24:07Thank you.

24:37Thank you.