Business Insider: New product FreeKick lets parents help their children build credit without making them an authorized user
Written by Paul Kim; edited by Jasmin Baron
May 15, 2023, 4:32 PM CST
- FreeKick is a credit-builder product that can help parents build credit for their children ages 14-25.
- Users make a $1,000-$2,500 deposit into a savings account, used to pay off a $600 credit-builder loan over a year.
- Depending on the size of the deposit, a FreeKick account will cost $0 – $99 annually.
Traditionally, the easiest way for parents to help their children build credit is by adding them as an authorized user on a credit card. However, this opens up both parents and children to several pitfalls that come with authorizing someone else on a credit card. If a parent misses a payment, that can hurt the children. On the other hand, any charges that a child makes will be the parent’s responsibility.
Austin Capital Bank, a savings bank out of Austin, Texas, is launching FreeKick Credit Builder, a new credit-building product that allows parents to help their children build credit without risking their own credit. Here’s what you need to know.
FreeKick aims to address the Gen Z credit gap
Because credit scoring algorithms like FICO and VantageScore heavily consider the length of payment history when they calculate credit scores, younger people often lag behind older consumers. A FICO study found that 29% of Gen Z consumers either don’t have a credit score or don’t know if they do, and the average FICO credit score among Gen Z consumers (18-25) is 679 compared to 687 among millennials and 706 among Gen X.
This gap puts younger people at a significant disadvantage when they enter adulthood. Insurance rates are often more expensive, and qualifying for the best credit cards or loans is harder. “These things that are the first steps in adulthood, all are more difficult and cost more if you don’t have a good credit profile,” says Austin Capital Bank founder and CEO Erik Beguin, who also founded CreditStrong, one of the companies listed in our guide on the best credit builder loans.
… continued at:
https://www.businessinsider.com/personal-finance/freekick-parents-build-credit-children-2023-5
