Have a Student without a Clue?

Ok we like to think we need to give our kids a boost on their own and continue to help them along the road to financial independence in their early adult years. That's all well and good but I'm a firm believer that our young adults need to learn financial responsibility as soon as possible. So many young people have credit cards given to them by their parents. Still others get cash handed to them whenever they ask. And many have not had to manage their need for credit to continue education beyond high school without the help of their parents. For those reasons its important that our young people need to realize that a credit report, one way or another, WILL be created and remain with them throughout their lifetime. Better they create their own report on good terms than having one created by a creditor they owe and are delinquent with. So many times, our young people and some older adults also, realize they have a credit report and its got the wrong information on it. Its much harder to correct a report than it is to have one created with positive information.

One example is Tom who got a cell phone in high school on his parents account. Upon graduation with a job he was able to transfer his cell phone into his own name under his own social security number and address. As with most young people, Tom's cell phone was his life blood. He fell behind in his payments to the cell phone company and they shut off his cell phone. Now what? Well Tom went to another cell phone company. As time went, the original cell phone company kept sending collection notices to Tom who ignored them. Finally Tom decided to go to college and he needed to get a student loan for the first semester's charges. He was denied for a loan. In the letter of rejection, the student loan company told Tom he had a credit report with information that was bad. Tom had no clue he had a credit report or how important it would be to his future. When he got his report, the only piece of information was from his first cell phone company saying he owed money to them and was a bad risk. This is exactly how NOT to start a credit report.

On the other hand, Tera got a job in the summer of her Junior year in high school. That job enabled her to get her own cell phone. She paid it on time but waited until she graduated from high school to apply for her first credit card which she would only use in emergencies. She charged various small things on her card over the summer and paid the bills in full each month.
When she applied for a student loan, she was instantly approved because she had a positive report showing that she was able to meet her credit obligations on time and with care. Tera would make sure that she never paid her obligation late. She never had to clean up a negative mess but moved forward with positive information from the beginning of her credit report.

Moral of the story is for young people to start their own credit report on a positive note with a positive reference. Don't allow someone else to start your credit report on a negative note. It takes over 7-10 years to clear it up.