Credit health is as important as your mental or physical health. However many a times we realize the significance of credit health only when it is hurt. A low credit score hurts your credit worth and makes you ineligible to advance the loans.
Let’s find out some of the common mistakes which hurt the score in the beginning of credit building cycle of an individual. Herein we would focus on 3 ways parents accidentally harm their children’s credit report.
- Multiple Student Loans
The escalating costs of school and college fee is one of the major reasons why student loans are as much a fad as a necessity for young aspirants. The parents who fail to incur adequate research on the matter and avail a high cost loan for the purpose, certainly build a huge financial burden right in the beginning of their child’s credit life cycle.
Many people mindlessly raise multiple loans for students owing to availability of credit facility at lower rate. With enormous amount of debt it would be a huge responsibility for a student to repay a loan after completing their education. As a parent, it is your duty to calculate total fee amount and try to look for the least expensive way to finance your child’s education.
You also need to build the healthy habit of saving funds in your child. As a parent, it boils down on you to inculcate good financial habits in your child. Raising too much of loan for their education would not be a smart decision if it results in low CIBIL score.
- Share your credit cards
Excessive spending is another key reason for impending balance on credit cards. Before handing over a credit card to a young mind, it is important to help them understand the importance of not having huge balance at the end of every month.
Being a parent you can also add the kid as your credit card account holder. It will sometimes help them to improve their CIBIL score. But maintaining good credit behaviour would be a must. As an adult you need to ensure that regular payments are processed on time and there is no balance after the due date. Remember your child is most likely to follow your footsteps. If you are not serious about repaying your bills on time, the child is also not likely to pay attention to deadlines. You would seriously challenge your child’s future with bad credit habits.
- Credit education
If you fail to teach right knowledge about finances and credit to your child it is your failure as a parent. You need to make the young mind understand the important aspects related to money management and ways to improve CIBIL score. The first credit lesson starts from home. You need to make the child understand how credit affects their life. You need to make them understand the importance of credit for their education, job to buying a home or car.
You need to teach them how important it is to monitor their credit score multiple times in a year. It is important to let them know how information in their credit report will impact their credit score.
Educate them about the available resources to obtain a free annual report. You can choose to review it along with them so that they learn the intricacies of maintaining a good score. You need to help your child develop a mindset that it is easier to maintain credit health rather than fixing bad history later on.
Last but not the least, do not forget to talk about identity theft threats. For online it is one of the fastest-growing crimes. They should know that sensitive information related to account should not be shared with anyone outside.