The Birds, The Bees, And Your Credit Score…
“Why is my credit score so important?” I had this conversation with my almost 19 year old son the other day. I realize that most young adults are unaware of credit scores and what they mean to their financial future. So, over dinner, my husband and I discussed with him the advantages of a high credit score. It’s another talk all parents need to have with their young.
Credit scores range from 300-850. As one might expect, young adults typically average a much lower score than, let’s say, people in their 70’s. According to Experion, one of the three credit scoring and reporting agencies, the national average credit score is 678. Very low scores pull that average down. The average score here in Alabama is 671. What’s interesting, though, is that 60% of the population has a score of over 720.
During our conversation, I advised to my son to protect his credit score at all costs. I think understanding the consequences of a low score will help a lot. When I explained that a low score would cost him money, he listened carefully. Right now, he has one credit card, but has never used it. I suggested he save up for something he wants to purchase, and put the money in his checking account.
Then he could charge the item on his credit card and pay it off upon receiving his statement. I hesitated before that knowing how easy it is to make just the minimum payment. However, establishing some (good) credit is equally important. This is basic, but he found it quite informative. How many of us parents mistakenly assume our children automatically know how to manage money?
So today, we are hearing about the “tight” mortgage money and how difficult it may become for someone to purchase a home. I say, if we protect our credit scores, it won’t be so bad, after all. What is wrong with a little bit of old fashioned responsibility?