Do you have a young adult about ready to leave the nest and fly out on his own? Hopefully, you’ve taken the time to teach him about financial responsibility including responsible credit use. Careless credit use in young adults’ early 20s can affect the next decade or two of their financial lives.
If you have young adult children and haven’t yet taught them these lessons, now is the time. It’s not too early for teens to learn, either!
Credit is used in ways you may not expect. Sure, when you apply for a car loan or a new credit card, you expect your credit score and credit report to be pulled. However, employers (especially if you’re pursuing a job in the financial industry) may ask to run a credit check as will many landlords. In addition, your credit score may also affect the rates you get for automobile insurance! (The better your credit, the more responsible you are, the insurance industry thinks.) Having a strong credit score can benefit you long before you think of applying for a car or home loan.
Any financial moves you make can have a long lasting impact on your credit score. If you routinely pay your bills and credit cards on time, great! That kind of behavior will improve your credit score. However, if you’re late on your bills, that can stay on your credit report for 7 years, even if you got caught up on payments and are currently paying on time! There are a whole host of other credit behaviors that can stay on your report for 7 to 10 years, often negatively affecting your credit score.
Think carefully before opening and closing new credit accounts. Did you know that once you close an account, it will stay on your credit report for 10 years? Yikes! That is incentive not to sign up for store credit every time you’re offered the opportunity. Plus, when you close an account, you might think you’re acting responsibly, but you might be negatively affecting your credit score. Credit scores usually consider the length of time you’ve held a particular account (the longer the better: these are known as “aged accounts”). Closing an account, especially a long held one with a high credit limit, can mar your credit score.
Your credit score can affect your spouse. When you get married, your credit score can affect your spouse, either negatively or positively. If your spouse has a great credit score but you do not, and you apply for a mortgage together, the two of you together will get a much higher interest rate than she would if she applied by herself with a good credit score.
However, the reverse is also true. When my husband and I married, he had NO credit score, and I had a very good credit score. Since we share all accounts, after many years of marriage, we have almost equal credit scores, thanks in part because he joined onto my accounts that I held before marriage.
When I left for college, I definitely didn’t know these things, and it didn’t take me long to accrue credit card debt as so many college students do. I hope when Bookworm leaves for college and lives on his own, I’ve taught him enough so that he can handle credit responsibly.
How do you teach your children about wise credit usage?
This blog post was written as part of a sponsored program for ConsumerInfo.com, Inc., an Experian Company. All views expressed are entirely my own and were not influenced or directed by Experian. This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
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