According to data from the U.S. Census Bureau, a record 32 million adult Americans lived with their parents or grandparents as of April. The pandemic is one likely culprit, but other factors – including housing costs and high student debt – have contributed to this phenomenon for years.
Moving back in with your parents may feel like a regression, but there are many things you can do now to get your finances on track. Focusing on your credit is one priority that will pay off when you’re ready to move out.
Here are four credit moves to make when you move back in with your parents.
1. Keep Paying Your Bills on Time
Moving back in with your parents might shrink the number of bills you have in your name, but you still need to make sure you pay all your bills on time. Payment history is a major component of your credit, and a single late payment can do a lot of damage to your credit score. Continue to pay your bills by the due date, and don’t blow off that last electric bill from your old apartment – make sure all of your accounts are paid.
2. Get a Credit Card
If you don’t already have a credit card, getting a starter card can help you establish credit history. Paying your bill on time and maintaining a low balance demonstrates responsible debt management.
But when you have poor credit or a limited credit history, qualifying for a credit card can be difficult. Consider these starter options if you don’t have strong credit:
- Student credit card: College students can open student credit cards to establish credit. Student cards tend to have looser credit requirements and low credit limits. Some cards offer rewards such as cash back and statement credits for maintaining a good grade-point average.
- Secured credit card: These cards require a security deposit to open, which defines the credit limit. For example, a $500 deposit may get you a card with a $500 credit limit. Otherwise, secured credit cards can be used to make purchases and build credit the same as a traditional card.
- Becoming an authorized user: Your parents can add you as an authorized user to their credit card, letting you piggyback off their credit. You’ll need to check with the card provider to see if they report card activity for authorized users. This comes with some risk because if your parent misses a payment, maxes out the card or otherwise behaves irresponsibly, that behavior negative affects your credit as well.
3. Pay Down Debt
Debt isn’t automatically bad for your credit; in fact, it’s necessary for establishing credit history. But paying down your debt on time allows you to build a strong payment history. In addition, paying down debt frees up money to focus on other financial priorities, like moving out. And high credit card balances can actually damage your credit score by raising your credit utilization.
Looking for the right debt repayment strategy? Here we break down two of the most popular repayment methods.
4. Monitor Your Credit
Credit doesn’t take a break when you’re living with Mom and Dad. You need to be aware of how your behavior affects your credit and watch for signs of identity theft. Credit monitoring can help by sending you alerts if there are changes or suspicious activity and identifying symptoms of identity theft for rapid response.