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Conquer Fear of Credit Cards Now, Reap Benefits Later

Young adults who are afraid of credit cards in the long shadow of the recession usually think only of the risks, rather than the role they play in establishing credit, consumer credit experts say. That can hold them back from building the credit history they’ll need later on if they want to finance a car or get a mortgage.

Data from the Consumer Financial Protection Bureau show that about half of people ages 18 to 34 had at least one credit card in 2015, compared with 60% to 80% for those 35 and older. Last year, an analysis of Federal Reserve data by The New York Times found that just over a third of these young adults, or millennials, had credit card balances, an indicator of whether people are using their cards.

Credit card issuers in the past marketed extensively to young people, particularly college students, which helped them establish a credit history. That ended with a federal law in 2009 that made it harder for people under 21 to obtain a credit card. Lingering memories of the economic downturn left younger adults wary of credit cards even when they became eligible.

“One of the reasons why millennials are afraid of credit cards is because many of them watched their parents get in trouble during the Great Recession,” says Beverly Harzog, author of several books on credit cards, consumer credit and managing debt, including “The Debt Escape Plan.”

“Fear partly comes from the unknown, from not having used a credit card,” says Mikel Van Cleve, personal finance advice director for financial services firm USAA.

Here are five common questions and answers that can help credit newcomers understand credit cards and conquer their fears.

Why get a credit card at all

Using a credit card is the fastest and simplest way to build a credit history. And you don’t have to go into debt to do it. Use the card to buy only what you can afford — what you would otherwise pay for with cash — and then pay off the balance in full every month.

“Don’t think about debt. Think of a credit card as a tool to build credit,” Harzog says. “You want to build a credit history because it will help you throughout your life.”

Your credit score is a gauge of how much you can be trusted to borrow money: Do you spend within your means? Repay the money on time? Using a credit card responsibly demonstrates your ability to meet your financial obligations and builds your score. A good credit score can make the difference between loan approval and rejection, and it will get you better interest rates.

Aren’t there risks?

Just as using credit cards responsibly can build your credit, using them irresponsibly can damage it. Piling up debt, maxing out the card, paying late or missing payments hurts your score. Fear of these things is what drives fear of credit cards, but these things don’t have to happen: Carrying a credit card doesn’t mean going into debt or buying things you can’t afford.

If you have no credit, can you get a card?

Newcomers to credit have a couple of options. One is a secured credit card. With these, you make a refundable security deposit — say, $200 or $500 — and this becomes your credit line.

“Each month, you make a payment that gets reported to the credit bureaus,” Van Cleve says. In time, with responsible use, you’ll be able to move up to a regular, unsecured card that offers rewards or other benefits.

Another way to get started is to become an authorized user on someone else’s credit card, such as a parent’s. But not all issuers report authorized-user activity. “As long as the history is being reported, you’ll get credit for it,” Harzog says.

How much will interest cost me?

Credit card interest rates are called APRs, or annual percentage rates. The bad news: Your first card is likely to have a high APR. The good news: “If you’re paying your balance in full, you won’t have to worry about your APR,” Harzog says.

Don’t credit cards have a lot of fees?

Most credit card fees are avoidable, including late fees and cash-advance fees. Many cards don’t charge an annual fee, so look for one of those if you’re anti-fee. Rewards cards often charge an annual fee, which can be worth paying if you get sufficient benefits back.

Avoid cards that charge monthly maintenance fees or that require an application or processing fee before your account is even open.

Ellen Cannon is a staff writer at NerdWallet, a personal finance website. Email: ecannon@nerdwallet.com. Twitter: @ellencannon.

This article was written by NerdWallet and was originally published by The Associated Press. 

9 Simple Ways To Raise Your Credit Score – Free EBook

MoneyTips Download your FREE ebook now! Welcome to MoneyTips! We designed this free eBook to help people understand credit and raise their credit score. Download 9 Simple Ways To Raise Your Credit Score and you will learn: How to see your credit score and credit report free and without a credit card; 9 ways to raise your score and keep it high; 6 ways to start getting credit; Credit-building tips from experts… and a whole lot more! 9 Simple Ways To Raise Your Credit Score is free with your free MoneyTips membership. Improve your credit score today! Download your FREE ebook now! NOTE: Please make sure you do not have a pop-up blocker enabled that could prevent the eBook download. Originally Posted at: https://www.moneytips.com/download-free-raise-your-credit-score-ebookDownload the Give Yourself Credit eBookGive Yourself Credit – Free EBookTop 3 Reasons To Read Your Credit Report

Buying Your First House: Starter Home or Forever Home?

If you’re a first-time home buyer, you may be wondering: Should you purchase a small starter home to get into the market now, knowing you may grow out of it in a few years? Or, should you stretch your budget — or spend more time saving — to get a “forever home” that will take care of your long-term needs?

Here are some factors to consider as you weigh whether to get a home best suited for the short term or the long haul.

Market conditions: Mortgage rates are historically low, but there’s no telling how long that will last. Also, many real estate markets nationwide are booming; consider whether to jump in before home prices get even higher, or whether they may weaken. • Where you want to live: Consider if you’d be OK living for a few years in the suburbs, where you might be able to find something more affordable, or if you’d rather try to snag a home in a different area where you want to live long-term• How much house you can afford: It ultimately comes down to how much money you have saved and how much you can afford to spend on a monthly mortgage payment. Use a home affordability calculator to see what’s within your price range.• What kind of house you want: For a starter home, you might go for an apartment, condo or townhouse in an up-and-coming area. If you’re thinking forever home, a single-family detached or a house with land to build an addition later could be a better fit — but it’ll be more expensive. • The costs of getting out early: If you do spring for a starter house now, and you end up getting married or having kids or needing to move quickly, you may face penalties, such as capital gains tax

Those are some of the big-picture considerations. Let’s dive into the details on what else you need to think about.

Starter home considerations

Your lifestyle: Do you want to be in the middle of a big city, or are you fine with the ’burbs if that means you can own a home? If you want to live centrally, where real estate is most expensive, you’ll probably have to start small. Dana Bull, a real estate agent in Boston with Harborside Sotheby’s International Realty, remembers when she bought her first condo at 22, she could afford only one well outside of Boston, and she had some regret as she missed being in the city near her friends. Consider what you’re willing to sacrifice, both in terms of location and size.

Your future needs: Bull says many first-time home buyers assume they’ll be in a home much longer than they actually are. She says young, single people sometimes don’t realize how quickly life can change. A job switch, new relationship or new baby can alter what you need in a home.

Zachary Conway, a financial advisor with Conway Wealth Group LLC in Parsippany, New Jersey, adds that selling a house can be stressful — especially if you’re in the midst of major life changes such as having a baby.

So, if your life is full of flux and you think you would stay in your starter home for only 1 1/2 to three years, it may be less stressful to keep renting until you’re ready for something large enough to meet longer-term needs.

Capital gains taxes: If you set out to buy a starter home for the short term, be careful, Bull says. If you sell soon after moving in, you may owe capital gains tax on your profit from selling the home.

According to the IRS, individuals are excluded from paying taxes on $250,000 ($500,000 if married) of gain on a home sale as long as the house was used as your main residence during at least two of the five years before selling it. That means you may want to think carefully about buying a home you’ll grow out of in less than two years. Consult a tax professional to see how this could affect you.

Consider an exit strategy: If you’re considering going the starter home route, you should think through from the start how you’ll offload it when the time comes to move, Bull says. For instance you might buy a property that you could rent out to cover your mortgage, especially during times of economic uncertainty, she says. This helps ensure you can cover your mortgage payment if you need to move ASAP, or if the market is weak when you hope to sell but you don’t want to take a loss.

You should also carefully research the area in which you’re looking to buy, Conway says, and confirm “there’s enough resale potential to make sure that even in a market that’s heading downward, you still have a likelihood of being able to get out of where you are.”

Forever home considerations

Interest rates: Conway says that if you decide to wait so you can afford a forever home, there’s a chance interest rates could increase from their current historic lows. “You might be able to scrape together some additional funds in the next few years, but maybe at that point, we may be closer back to historical norms of interest rates, and your mortgage is more expensive,” Conway says. Nobody can predict what will happen, but it’s important to keep a pulse check on mortgage rates.

Hot markets: In many major cities such as Boston, property values are rising rapidly, Bull says. There’s also a lot of uncertainty as to whether home values will plateau or keep going up, leaving first-time home buyers wondering if they should give in to the “feeding frenzy,” she says. If you wait in hopes of saving for a larger home, it’s possible prices will rise faster than you can save, she says.

Your cash flow: Considering your lifestyle and life events is certainly important, “but really at the end of the day, it comes down to the math of do we have the cash flow,” Conway says.

If you want a forever home, you have to ask yourself whether you can afford the larger down payment, and whether your salary supports a higher monthly mortgage payment. Conway says it’s key to create a budget and to carefully track what you save and spend, and to be sure you can afford a more expensive home. Don’t assume your salary will be higher in a few years and go for a bigger mortgage, he says. And don’t forget to factor in higher ongoing expenses like property taxes and homeowners insurance.

» MORE: Calculate your monthly mortgage payment

Don’t stress too much

While making the decision between a starter home and forever home is a major move, Bull says don’t fret too much about making the wrong decision. Remember, she says, “there are always options — you can sell, you can rent, you can put yourself in a position where you can go out and buy another house.”

Conway adds that if you decide you’re not ready to buy for a while, that’s OK too, and you shouldn’t look at rent as throwing away money. “I wouldn’t jump into buying something for the sake of the fact that’s what we were told we should do,” he says. “It really comes down to what you’re comfortable with from a cash flow standpoint and what you want in your life. There’s nothing inherently wrong with paying rent.”

Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email: emily.crone@nerdwallet.com.

Help For Homebuyers With Student Loan Debt

MoneyTipsStudent loan debt has made it difficult for many young Americans to enter the housing market. A recent survey from the National Association of Realtors found that 71% of student loan borrowers cited their student loan burden as a reason to delay buying a home. The student loan plight may be a major factor in the housing market struggling to gain momentum, and these loans certainly affect the debtors directly. Jocelyn Paonita, Founder of The Scholarship System, describes the issue this way: "College debt has such a crippling impact for the rest of someone's life because you're not able to take advantage of opportunities right from the beginning." Home mortgage backer Fannie Mae recently announced new rules that may help relieve that impact. Fannie Mae introduced three changes to its underwriting rules that may help those struggling with student loan debt to enter the housing market. The change will also allow the estimated 8.5 million student loan debtors that already have homes to reduce their overall debt burden. Two of the changes relate to the calculation of the debt-to-income ratio (DTI), an important threshold in establishing loan qualification. To qualify for a mortgage loan, your monthly DTI ratio should generally be at or below the 43% to 50% range. Fannie Mae has altered two common sticking points for student loan debtors that lowers the DTI and makes it more likely that debtors can reach the loan qualification threshold. The first change involves income-driven repayment plans – programs that allow reduced payments on student loans in proportion to the debtor's income. Because the payment can vary as part of the plan renewal, lenders were instructed to use a set 1% of the student loan balance instead of the lower payment amount when calculating DTI – a difference that can easily push calculated debt levels above the DTI threshold given significant student loan balances. Under the new rules, the existing lower payment amount may now be used for calculating DTI values as long as the payments show up on the borrower's credit report and are above zero. It may take a month or two after a payment plan is established for that plan to show up on a credit report, so make sure that you can verify your lower payment before attempting to take advantage of this new rule. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. The second change regards third-party payment of student loans. Whenever a third party (such as an employer or a parent) is regularly making the student loan payments on behalf of the student, the student loan debt has been historically included in the borrower's debt-to-income ratio even though the debt is being regularly paid by others. Fannie Mae now allows mortgage lenders to exclude those debts from the DTI as long as there is documentation that the third party has made adequate payments for at least one year. For those who have the combined burden of homeownership and student debt, Fannie Mae has changed the rules to make cash-out refinancing a more economical option. If you have enough equity in your home to pull out extra cash and apply it toward paying off your student loan debt, Fannie Mae has eliminated fees associated with the cash amount above the mortgage value and ensured that the excess is not assessed at a higher interest rate than the mortgage. Not all student loans must be paid, but at least one student loan must be paid off in full as part of the transaction. It's not obvious that a cash-out refinancing would be preferable, because it depends on the terms and type of your student loan. The interest rate on your refinancing may not be preferable to the rate of your student loan, especially federal Perkins or Stafford loans. You will also lose the potential advantages associated with a federal loan, such as deferment options. Use online calculators to run numbers and verify whether a cash-out refinance makes sense for you. MoneyTips is happy to help you get free refinance quotes from top lenders. Fannie Mae is doing its part to help ease student loan and housing burdens simultaneously. If their rule changes can help you meet your goals, why not take advantage? Photo ©iStockphoto.com/michaeljung Originally Posted at: https://www.moneytips.com/help-for-homebuyers-with-student-loan-debtGraduates Face Mortgage Qualification Difficulties Thanks To Student LoansToday’s Headlines: Student Loan Debt Versus Home OwnershipWhere Can Millennials Afford to Live?

Why Your Friend Has a Better Credit Score Than You

Tia Chambers checked her credit score for the first time at age 23, after watching a friend check his, she says.

“I said, ‘Oh boy, my credit score has to be better than that,’” says Chambers, now 31, who blogged about her experience on her website, Financially Fit and Fabulous. To her surprise, it was worse. “My credit score was a lot lower than I expected. It was actually in the mid- to high 500s.”

She felt deflated. “I thought, ‘Man, I pay my bills on time. Why isn’t my credit score higher?'”

If you’re new to credit, you might wonder the same thing. Why does your credit score pale in comparison to your friend’s, even though you checked it on the same website, using the same scoring model?

“For someone who has a low credit score, there is always — and I mean always — a logical explanation for why that score is the way it is,” says John Ulzheimer, a credit expert who formerly worked for credit-scoring company FICO and credit bureau Equifax. “It’s never random. It’s never anecdotal.”

These factors might be working more in your friend’s favor than in yours.

Consistent record of on-time payments

You and your friend might be in the habit of paying bills on time, but even one forgotten payment can drag down a credit score.

That’s part of what happened to Chambers, of Indianapolis. When she checked her credit report, she says, she discovered a forgotten, unpaid medical bill in collections. She paid it, negotiated to get the collections account removed from her credit report and noticed a slight lift in her score afterward, she says.

Payment history is a key factor for both FICO and VantageScore Solutions, the two major credit-scoring companies in the United States. It accounts for 35% of your FICO score, and VantageScore characterizes it as “extremely influential.” Payments more than 30 days late are reported to the credit bureaus and, like other negative marks, can stay on your credit report for seven years.

“[A negative mark] is much easier to avoid in the first place, rather than trying to get it off after it already has happened,” Ulzheimer says. If you negotiate with a collections agency to get a collections account removed from your credit report, get that promise in writing.

Less debt

If you never talk to your friends about money, you might not realize that their financial situations are different from yours. Becky with the good credit score might have less debt than you.

Using a smaller percentage of your credit card’s available limit and paying down student loans can boost your credit. The amount you owe accounts for 30% of your FICO score. For VantageScore, percentage of credit used is a “highly influential” factor, and total debt is “moderately influential.”

Chambers says she worked second jobs and trimmed spending to pay down her high credit card balance and thousands owed to her college.

“I saw at least 100 points improvement by the time I paid off that debt,” she says.

Longer credit history or varied account mix

Your age, gender, sexual orientation, race, location, religion and political views don’t affect your credit score. Having a high income won’t goose your score, either.

So what else counts? The length of your credit history, for starters. This makes up 15% of your FICO score and is “highly influential” for VantageScore. Your friend may have started using credit earlier than you did.

Applying for new accounts can also ding your credit, but generally only a little. Maintaining a mix of accounts — for example, carrying both loans and credit cards — can help.

Steps to improve your credit

To see what’s hurting your scores, pull your credit reports for free from AnnualCreditReport.com, a federally authorized website. Then, take these steps:

  • Dispute inaccuracies. Report errors on your credit reports to the corresponding credit bureaus.
  • Pay down debt. In particular, reducing high balances on credit cards can boost credit significantly.
  • Piggyback. If your parents have excellent credit, ask them to add you as an authorized user on a credit card.
  • Open a credit card and use it responsibly. Start with a student card or a secured card, one that requires cash collateral. Those under 21 may need a co-signer.

Finally, don’t pay too much attention to what others are doing. Credit scores vary because people’s financial paths vary. “Everyone’s journey is different,” Chambers says.

Claire Tsosie is a staff writer at NerdWallet, a personal finance website. Email: claire@nerdwallet.com. Twitter: @ideclaire7. This article was written by NerdWallet and was originally published by The Associated Press.

Warning: Social Security Estimates Can Go Down

MoneyTipsTo plan properly for retirement, you have to know how much money you should expect to receive in Social Security benefits. Fortunately, you can check your estimated benefits anytime by establishing a my Social Security account on the SSA website. Unfortunately, these estimates are just that — only estimates, subject to significant change. That change may not be in your favor. The SSA calculates your benefit using the 35 years of your highest annual income. In producing estimates, it assumes that your income will stay at the current level throughout your remaining working years until you draw benefits and/or reach full retirement age (FRA). Layoffs, job losses, and similar negative income events will make your estimate too high. Conversely, raises and career changes to higher-paying positions will make your estimate too low. Essentially, this approach assumes a highly unlikely zero wage growth and zero inflation until you retire. The further away that you are from retirement, the greater the likelihood of changes that will significantly alter your estimate — especially if you haven't established 35 full years of income yet. In the calculations, your income is indexed to account roughly for the changes in average wages over time. Once you have established 35 years of indexed income, the next year is compared to the lowest indexed value in your work history. The larger value is kept and the lowest value is dropped from your estimate calculations. Your average indexed monthly earnings are then run through a separate formula to calculate your "primary insurance amount" — in other words, the benefits you will receive when you reach your FRA. A sample page for calculating benefits is available on the Social Security website. If you prefer to let a computer do the work for you, the SSA offers an online Retirement Estimator that performs these calculations based on current information. Remember that this estimator uses many of the same assumptions that created your estimated benefits on the my Social Security account (to keep the calculator user-friendly, you input less information than the SSA uses for your formal estimate). Even if the SSA's estimates were spot on every year and your income level did not throw off the assumptions, there is one wild card that you cannot predict no matter how hard you try — Congress. Social Security law undergoes periodic revisions, and almost every year there is at least some proposed change to benefits. How confident are you that any of Congressional changes will increase your benefits? As you run through your retirement calculations, it's wise to follow the SSA's approach and expand on it to account for the unpredictable economic factors that are built into the estimates. When planning your retirement, take your projected Social Security benefits and assume that some factor will drop those benefits even further. Use the SSA's online calculators to run different scenarios. Cut your expected benefits by some percentage that meets your comfort level, and make those cut percentages even larger if you are well below retirement age. That will provide motivation to fill in the gap with your own retirement funds (401(k), IRA, etc.) and give you more control over your retirement. As you plan, take into account any alterations caused by drawing benefits on anything other than your FRA. Drawing benefits early reduces your monthly benefits and waiting to claim beyond your FRA increases them. Spousal benefits are lower than benefits on your own record, but claiming them may make more sense if the difference in lifetime income is large. Couples should use the online Social Security Retirement Estimator to check individual benefits and calculate whether to claim spousal benefits or claim on individual employment records. The main message is to plan your retirement using conservative scenarios that are below your SSA benefit estimates. "Start a retirement fund as soon as possible," advises Consolidated Credit Director of Education and Public Relations April Lewis-Parks. It's better to have more money than you need in retirement than not enough. You can always direct extra money toward doing good deeds after you are gone. Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/DNY59Originally Posted at: https://www.moneytips.com/warning-social-security-estimates-can-go-downHow Much Will Social Security Pay You?6 Social Security SurprisesFewer Social Security Statements To Be Mailed

Are You Cut Out for a Work-From-Home Job?

Telecommuting has become synonymous with convenience, flexible schedules and, yes, pajamas. You don’t have to commute, spend money on transportation or dress up. But despite the appeal and laid-back reputation, there are challenges.

“Not everybody is cut out for working from home,” says Jack Aiello, a psychology professor at Rutgers University.

From your work style to your work space, here’s what to consider before working from home.

Your personality

Certain personalities make effective at-home employees.

“Above all else, two things are required to be a successful work-at-homer: the ability to be a self-directed, focused planner and a healthy dose of introversion,” Kit Yarrow, a consumer psychologist and professor emeritus at Golden Gate University in San Francisco, said in an email.

Yarrow says extroverted workers prefer more person-to-person contact than many at-home jobs provide.

Telecommuters interact less with co-workers than their workplace counterparts. After all, you can’t chat at the water cooler on your break or stop by a colleague’s desk on the way to lunch. That solitude can be hard for those who are sociable, Aiello says.

But don’t count yourselves out, social butterflies. Yarrow says personalities aren’t black and white. The “mildly extroverted” can make telecommuting work if they have an after-work social life, for instance. Renting a co-working space can also provide a social outlet for remote employees.

Your environment

If you live with other people, Aiello says, it’s essential to have a separate space where you won’t be interrupted. You need at least a door that closes you off from the rest of the house.

Be realistic about potential distractions. “Some people can’t help but go on eBay,” Aiello says. “Some people can’t help themselves from playing computer games. There are all kinds of things that get in the way when they don’t have someone over their shoulder.”

And while society may paint a picture of at-home workers on the couch binge-watching Netflix, some telecommuters have a tendency to work too much because they never leave their work environment. Many check their email at night, Aiello says.

Remedy this with boundaries, says Cassidy Solis, senior adviser for workplace flexibility with the Society for Human Resource Management, a trade association. Solis, a telecommuter herself, sets expectations; she won’t respond to emails outside regular working hours unless there’s a pressing deadline.

Your employer

Finally, your employer and supervisor will have a lot to do with your success at home.

IBM made news in May when it called telecommuters back to the workplace. As companies re-evaluate telecommuting, so should employees.

Ask about whether you’ll be included in meetings and how frequently you’ll get feedback from management. Teleconferencing and regular check-ins can help alleviate feelings of isolation by fostering a team environment, Aiello says.

You’ll want to discuss your schedule as well. You may work more efficiently in a position that allows for time at home as well as in the office.

Gallup’s State of the American Workplace report found that employees who spend at least some of their time working remotely have higher engagement than employees who never work remotely. The magic formula for engagement happens when employees spend 60 percent to 80 percent of their time working off-site, the report found.

Solis says it’s important to build in time for face-to-face contact. “I think it’s good to show your face,” she says. “It’s good to see your co-workers. It’s good to feel connected. It’s good to feel part of a community of work.”

It’ll also keep you in the eye of leadership, she adds.

Will it work?

If you fit the criteria and want to explore telecommuting, Solis recommends checking your company’s existing policies, drafting a proposal and starting with a trial period.

Even if you don’t check every box on the ideal-telecommuter checklist, working from home could still work for you.

“Most people, with the right mindset, can actually enjoy … not having to put that suit on for the day or do that commute,” Aiello says.

If not, there’s always the office.

Email staff writer Courtney Jespersen: courtney@nerdwallet.com. Twitter: @courtneynerd.

This article was written by NerdWallet and first published by The Associated Press.

‘Gen Z’ Off to Strong Start With Credit, Analysis Shows

The oldest members of “Generation Z” have barely crossed the threshold into legal adulthood, but they’re already demonstrating financial prowess, according to an analysis released this week by the Experian credit reporting bureau. In fact, Experian reports that 18 to 20 year olds are more likely to pay off their balances each month than younger millennials, those ages 21 to 27.

Of course, members of Gen Z have also had less time to make money mistakes and incur obligations. “They don’t have as much debt yet,” says Kelley Motley, director of analytics at Experian. Many still live with their parents and don’t yet have a mortgage or children to support. That might help explain why they’re good at staying on top of monthly payments.

Many members of Gen Z also have impressive credit scores: 37% already have at least a “prime” score, which Experian defines as 661 or better. On average, they have a slightly higher credit score than young millennials. Prime scores typically qualify borrowers for lower interest rates on loans.

The data is based on consumers ages 18 to 20 who have credit files, meaning their name is on a student loan, credit card, auto loan, mortgage, or other type of credit account that has been reported to Experian. In many cases, 18 to 20 year olds might have opened the account jointly with someone else, such as a parent.

Experian’s findings offer lessons from Generation Z for millennials and others:

Pay in full every month

Paying your credit card balance on time and in full each month keeps you out of debt and can save you hundreds of dollars per year in interest and fees. Two in three members of Gen Z who have credit cards pay them off in full each month, compared with fewer than half of young millennials.

Build a strong credit history

Members of Gen Z are most likely to have a credit file because of student loans, followed by auto loans and credit cards. By making regular payments on these accounts, they’re building a solid credit history. “Those decisions they make today are going to be important for their future credit behavior and access to lower rates,” Motley says.

Use online tools

“They are very savvy. They have the internet. Boomers and Gen X didn’t have that available,” Motley says. As a result, members of Gen Z have more resources to learn the basics of responsible credit use — or at least they know where to look.

Gen Z might be young, but their baby steps into the world of credit look firm.

Kimberly Palmer is a staff writer at NerdWallet, a personal finance website. Email: kpalmer@nerdwallet.com. Twitter: @KimberlyPalmer.

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