Hey everyone, if you’ve been following along in the past few weeks, you’ve heard a bit about Katie A. I’ve been anticipating this day since the day she first contacted me. With today’s post, Katie officially becomes a personal finance blogger, and let me tell you…the post is incredible. Everyone in the CNA Finance community, welcome Katie A, our new friend!
This is the story of how I achieved a 700+ credit score by the time I graduated from college. The process started when I was about 15 years old and way before I ever opened up my first credit card.
First, let me give you some context: about the only personal finance advice I ever got from my parents as a kid was to (1) save aggressively and (2) never get a credit card. Sound familiar?
In other words, I didn’t learn this stuff at home. In high school I was lucky to be in a very small group of students in a 10th grade class about personal finance, where the teacher advised that we get a credit card as soon as possible.
I was a teenager, so naturally, I was instantly interested in learning more – mostly because it was the exact opposite of what my parents had taught me. 🙂
I had absolutely no idea how credit worked, and I had perceived it to be a bad thing. Of course, my teacher gave great advice about how to avoid debt by managing credit cards well.
Remember, I was only 15 at the time and I didn’t have a job – I wasn’t even close to being able to apply for a credit card. But I knew this information would come in handy in a few years.
A few years later, as my 18th birthday approached I started gathering the application materials for a credit card: proof of income, report cards to show that I was a good student, a recommendation letter, etc. And a few weeks after my 18th birthday I had officially established credit – while I was still in high school!
Of course, I practiced my teacher’s advice about managing credit. The results? By the time I graduated college four years later, I had a credit score of just over 700 and a credit limit of about $10,000 between two credit cards.
Even more results: by the time I was 25 I had achieved a 780+ credit score, had been approved for a loan for grad school (without a co-signer), and had been pre-approved for a mortgage at an excellent rate (also without a co-signer) – these accomplishments are not the norm, as reported by a recent article in the Los Angeles Times. And it all started at age 15.
Learning about credit at such an early age made a huge impact on me and made me aware of how powerful my decisions could be. Plus, by the time I left the nest to attend college in a new city – I was used to managing my credit card, I knew about the dangers of debt, and I was aware of expensive credit card offers.
I recall many banks on my campus offering free t-shirts to students who applied for their credit card. Crazy, right? Even crazier: this marketing tactic actually worked! Students would actually apply for cards, without knowing what they were getting into. I was lightyears ahead of my peers because I had learned about all this years ago in 10th grade.
Teaching teens about credit is an opportunity, not a risk. In her famous TED Talk, cognitive neuroscientist Sarah-Jayne Blakemore says that the teen years are “a period of life where the brain is particularly adaptable and malleable. It’s a fantastic opportunity for learning and creativity.” The teen years are a great time to teach this stuff for many other reasons:
- The sooner they learn it, the greater the impact will be
- By the time they leave the nest for college, they’ll be well informed and prepared to make important financial decisions on their own
- With student loan debt on the rise, knowing how debt works and how to minimize it is an invaluable skill for teens to master
Teaching credit management early on will have a greater impact and will give teens a head-start. When my parents refused to talk to me about credit – they were only trying to protect me from the dangers of debt. But ignorance is not productive – and in this case, it would have inadvertently hindered my development. Once you get over the fear of teaching your kid about credit, the next challenge is: how to teach it?
For more information about teaching your teen about credit and personal finance, head over to my site and sign up for my newsletter where I’ll share very specific actionable recommendations about how to do this.
But if you really want to get started, here’s a simple action step you can take TODAY to start the conversation about credit. You don’t have to teach them everything all at once. Start small and be casual.
Next time you’re discussing school grades, you can get the conversation started by saying something like, “Did you know I still get graded on stuff? The grade measures how responsible I am with money – it’s called a FICO score, the higher the score the better. And once you leave school, you’ll continue getting grades too.
That’s it! You’ve successfully gotten the idea of a credit score on their radar – in a way that they can relate to: by comparing it to grades in school. And you can leave it at that, you don’t even have to get into what FICO stands for, or what a credit bureau is.
The purpose of this very short, very casual conversation is to get this idea on their radar and to inspire curiosity. They will naturally want to know more if you leave them with a little bit of mystery.
In the comments below, please share with us how the conversation went. Were you surprised?
Want More To Read? Here Are 2 Great Posts From Around The Blogosphere!
Why Do You Live Where You Live – In this post, Andrew shares a bit about why he lives where he does and asks the question, “Why do you live where you live?” There’s some great responses in the comments!
5 Common Credit Myths – In this post on Gen Y Finances, you’ll learn some of the most common misconceptions about credit and credit cards!