Project 800 Youth Credit Program
How Does it Work?
There is no way around it - having good credit is important! Establishing a good credit score takes time and patience. At PeoplesChoice we recommend parents work with their teenagers to learn about their finances and start the journey to great credit. We can assist you and your teenager to build the foundation for a good credit score. We have successfully worked with 16 year olds to earn an A credit score by the time they turned 18. For a total investment of $22.26 in interest on the Project 800 loans, your son or daughter could achieve excellent credit by the time they graduate high school!
Earning good grades is important, but what may have equal impact in life is your credit score.
Here are the benefits of having a good credit score:
- Significant savings on interest rates on big ticket items like cars and homes
- Someone with FICO scores in the 620 range would pay $65,000 more on a $200,000 mortgage than someone with FICOs over 720.
- On a five-year, $30,000 auto loan, the borrower with lower scores would pay $5,100 more.
- A 15-year home equity loan of $50,000 would cost a low scorer $22,500 more than someone with high scores.
- Access to the best Low interest credit cards
- Better chance for an approval for a credit card or loan with better terms and availability
- Cheaper college loans
- More negotiating power to leverage a better deal
- Easier approval when renting a house or apartment and perhaps a lower security deposit
- Better car insurance rates
- Get a cell phone on contract without having a security deposit
- You can avoid security deposits on utilities
- Bragging rights as a good credit score is something to feel good about
It’s truly simple to start!
Step One: Your teenager applies for a PCU credit card with legal guardian. PCU has the safest no fee low fixed rate credit card on the planet supported by local service. You can decide if your child will get to use the card but having an approved card with 100% available limit will build credit each month, regardless if your child uses the credit card. We do recommend the parent setting up an automatic transfer each month for the minimum monthly payment just in case. On a $1,000 limit this would be a $20 minimum payment.
Step Two: You need installment along with revolving credit for a good credit score. We recommend a $1,000 secured installment loan at 2.05% APR with payments of $84.16 for 12 months. Total interest charged would be $11.13 over the 12 months. We would do this loan two or more times to build the installment piece of the credit history.
How Can I Improve My Credit Score?
- Payment history: This is typically one of the most important factors—roughly 30% to 35%—in determining your score in most scoring models. Late or missed payments bring your credit score down. Conversely, if you have a long history of paying your bills on time, your score will generally be higher. The most important thing you can do to boost your credit scores is to pay all your bills on time every month. If you establish a pattern of doing this over time, your scores will improve.
- Credit utilization ratio: This is the amount of revolving credit you're actively using compared with the amount of credit available to you, based on your credit card limits. The lower the ratio, the higher your credit score. Aim to keep your utilization ratio under 30%, but for the best scores, you'll want to keep it under 10%.
- Number of accounts: Credit scoring models also look at how many credit accounts you have open and on how many you carry balances. It's better to have more accounts that don't have a balance than ones on which you do carry a balance.
- Credit history: Most scoring models also look at how long you have actively used credit. They typically look at the average age of all your open accounts. The longer your credit history, the better it is for your score. You can't do much about this one, other than let time do its thing.
- Credit mix: Scoring models also take into account what types of credit you have, including installment loans and credit cards. To improve your credit score, aim for a good mix of different types of credit.
- Hard inquiries: When you apply for a new credit card or another kind of loan, the lender will request your credit report. That is considered a "hard inquiry"—and too many can lower your score slightly. However, multiple inquiries of the same kind—if you're shopping for a car loan, for example—during the same period are often treated as one inquiry. The impact of hard inquiries goes down the older the inquiries are.
- Negative credit information: If your credit report has negative financial information, like a bankruptcy or collection account, that can negatively affect your credit score, as well.