[pinterest count=”horizontal”] October isn’t just about fall colors, PSL, or Halloween, it is also credit awareness month! While you may think your kids are possibly nowhere near ready to get a credit card or apply for credit, the time when they will have to make these decisions comes quickly! Here are some tidbits you may not have known.
1. There is no credit fairy
When you turn 18 you are not just “gifted” a credit score. You have to earn it—so start your adult life right by keeping track of your score. In order to get a score you need to establish a report with a lender. That means your 18 year old needs to have a credit card, car loan, or other borrowing account.
What can you do as a parent?
You could set up your child as an authorized user on your credit card. Be warned—this means they can charge things to your card. However, with some guidelines and help if you’re vigilant and carefully spending money and paying off your credit cards each month that means your good habits are spilling over to your child simply by proxy. You don’t have to give you kid their own card but simply have them attached to your own to help them establish their own history.
2. Credit problems can last longer than that piece of gum you swallowed in middle school
You may have heard that if you swallow gum it’ll stay in your stomach for 7 years—that wasn’t gum they were talking about that was bad credit history. Financial problems can stay on your credit report for up to 7 years. Think about what that means—if you make bad money problems at the age of 18 that can follow you until you’re 25.
What can you do as a parent?
On a personal note make sure you take that advice and be careful with your own credit and money habits. However, when you’re thinking about how to help your kids, teach them how interest can add up. Little purchases can really start to get more expensive if they don’t pay off their cards each month and are paying an 18% interest rate. Credit cards and other debt is not scary or wrong but not using them correctly or being mindful with spending can lead to long term financial disasters.
3. You can check your credit report for free
By law you get a free credit report every 12 months from the three major bureaus (Equifax, Experian, and TransUnion) from www.annualcreditreport.com. Most people who check their report likely check to get a report from all three at the same time but you should check only one at a time. Look that report over and note any errors. If there are any, follow protocol to report the errors. By law the errors will be reported to all three even though you were looking at only one bureau. Then repeat this process in a couple months with another bureau and continually monitor your credit report all year round.
What can you do as a parent?
Here I think the best thing you can do as a parent is to demonstrate this behavior. You should be pulling your credit report AT LEAST once a year. Then once they are old enough and have their own credit history do it together, help them with the process. It seems really daunting but I promise you the entire process is really quite easy and the report isn’t too complicated to understand once you take a little time to sit and read through it. Your kids are watching you and will mimic your behaviors—make this a habit they start when they turn 18 (or close to it).
