For families with teenagers, there is a need to explain to them the importance of managing finances properly. It is ideal to impart the parents’ financial knowledge to their children before they are issued their own credit cards to manage their own finances.
A credit report can be a good instrument to use in introducing the topic of credit to teenagers. Credit statements incorporate years of credit behavior and are used by lenders as their basis of their decisions. Loans and credit card applications depend solely on the applicants’ credit reports. When parents’ explain to their teenagers the importance of credit information, how it is used and what attitudes they should embrace in themselves, eventually, they would act accordingly and correspondingly towards their credit behavior in the future.
Explain your most recent credit report with your children
Free credit check once every year is offered by agencies to individual as they are entitled by law to receive a credit report from each of the three credit bureaus which are Experian, TransUnion and Equifax. It is a good idea to introduce your teenager to the process of ordering a credit report so that they are well equipped with financial knowledge regarding their financial responsibility when they apply for a credit card or a student load.
Go through the credit report with your teen
Either your own report or the one available at agencies’ website should be reviewed with your teenagers. Make them understand the basic elements of credit reports and try to explain by relating it to good behavior. Your teenagers can learn good credit-building behavior, so that they can avoid making unnecessary decisions in the future which can leave a negative impression on their credit reports.
After learning how the information on your credit report is compiled yourself, it is necessary to explain that information to them. Many financial institutions report the payment activity, balances and other information about the credit cards and loans to the three major reporting bureaus on a regular basis. In addition, financial information such as bankruptcies and liens are included on credit reports as well.
You should also inform teenagers that credit reports are used for calculating credit scores. Financial information present on the report hugely influences the financial capacity of an individual. Make your teenagers know the importance of having a positive credit history. Explain to them the perks and benefits of an individual who is financially stable and responsible.
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