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Parents Needed to Keep Child’s Credit Report Blemish-Free

By Faye Mergel
Published: Saturday, November 14th, 2009

Teens have become more aware of the importance of having a credit card. Not only does it make shopping more convenient, it also helps them start their credit history at a young age. But experts warn that teenagers who mismanage their plastic will pay for its consequences in the future since all their transactions with creditors are recorded in their credit report. Specialists say teens, especially minors, must be properly guided on their first card to avoid ruining their financial future, adding that no other people can help a child better than her parents.

Parents Needed to Keep Child’s Credit Report Blemish-FreeAccording to financial counselors, there are two main reasons why people apply for a card. First, it allows them to buy the things they need or want more conveniently and safely. Secondly, it contributes significantly to a credit history, which lenders look into before granting mortgage or auto loan to anyone.

Payment history and the length of credit history put together make up 50 percent of a credit score, a three-digit number that determines the interest rates a person will get when applying for a loan. Additionally, a score can sometimes cause a person to be rejected for a loan or job application. This makes it all the more important for teenagers to handle their cards well.

Specialists explain that a score is derived from data on a credit report, which is created and updated regularly by Experian, Equifax, and TransUnion, the three major bureaus in the United States. If teens fail to make payments on their plastic or allow thieves to use their accounts, the delinquencies and late payments could remain in their credit report for up to seven years.

That is why experts call out to parents to continually guide their teenagers once they already have their own card. Since having a long credit history is greatly helpful, finance experts advise parents to include minors in their card accounts as an authorized user.

Industry specialists explain that being an authorized user means enjoying all the benefits an actual cardholder has but the ultimately payment responsibility still falls on the parents. Thus, minors must be taught that they will not be the only ones who will suffer if they rack up too much debt. Unpaid debts will mark on a parent’s credit report and will remain there for years.

Experts tell parents to make it clear to their kids what a credit card is for and how to use it well. They add that parents must emphasize the consequences of misusing a card since they are very grave and become instant red flags for lenders once they appear on a credit report.

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