If you are the parent of one or more teenagers, now is the right time to guide them toward a responsible financial future. Help your young adult kids to understand how to build a great credit profile now, and they may thank you for your good advice somewhere down the road.
What is a credit profile
A credit profile and credit history, are basically the same thing. They are documents used by lenders to determine whether or not a person is a good financial risk. A credit profile comprises past and current credit accounts, timeliness and completeness of payments as well as balances due. Credit card companies are not the only ones who may look at a credit profile. Landlords, prospective employers, and others with a valid reason to explore your credit history may access your report at virtually any time.
A secured card may be the right way for a young adult to start and build their credit profile, says Magnify Money magazine. The way a secured card works is easy. The owner of the card deposits money into a card account, and this amount determines the credit limit. In effect, the card acts as a debit card but appears the same as a regular credit card to sellers. Look for a card that comes with no annual fee.
Some protections are in place
Long gone are the days when credit card companies had free access to college and university campuses. Today, no credit card company may entice students on or near a campus to take on credit card debt with things like free pizza and gifts. The Credit Card Act of 2010 banned card companies from issuing credit cards to anyone under the age of 21, unless the young adult can prove enough income to pay the monthly bills and fees, or if they have a co-signing adult who has good credit. Sounds confusing? It can be. That’s why it’s imperative that parents teach their children well when it comes to things like obtaining plastic and managing credit.
Since the enactment of the 2010 credit card regulations, card issuers must be more transparent and direct about late fees, due dates and how long it will take to pay off the loan when making only minimum monthly payments.
Resolving your own debt
If you have gotten yourself into financial trouble, you may wish to set a good example for your teenager by consolidating your credit card debt into one manageable payment. Although it’s preferable to build good credit and never wreck it, sometimes things happen, and bills stack up to staggering proportion. By clicking here you can access reliable info about how to dig yourself out of debt without declaring bankruptcy in the process.
Parenting teens can be a challenge, to be sure. Take time to explain money concepts such as credit to your kids now, and they may lead happier, more responsible adult lives.