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Wednesday, November 20, 2013

How to Fix and Teach Your Kids About Credit

This is a guest post by Nancy Evans, a freelance writer who enjoys writing about frugality and parenting.

How to Fix and Teach Your Kids About Credit

It’s natural to want to hide your money mistakes from your kids. You don’t want them to worry about things that are your responsibility and, if you’re honest with yourself: you probably want your kids to see you as an infallible force. It’s better, though—especially if they are older—to be honest with them. And remember, every moment is a teaching moment.

Nowhere is this more important than with money. You obviously know how important it is to teach your kids the value of money. It’s also important to teach your kids how to recover if money gets the better of them for a while. Here are some things that you can do to both fix your credit and teach your kids about credit repair (and their rights if creditors come calling) at the same time:


1. Fix Mistakes

Counselors at Lexington Law say that when you want to fix credit scores and histories the most important place to start is with your current report and making sure that it is error free. Get a copy of your credit report from the three major credit bureaus and sit down with them and your kids. Go through them together, making notes of errors. Point out how each report is just a little bit different. Then, have them sit down with you as you make your correction requests to each bureau.

2. Validate Debts

You don’t want your kids to see that you’re afraid to answer the phone when the creditors start calling. Instead show them, by doing it yourself, that it’s best to calmly request that each debt collector verify the debt in writing. If they cannot (or will not) verify your debt, not only do you not have to pay them but you can have the account removed from your credit report and history. Legitimate collectors know this. Scam artists will give you the run around.

3. Using Credit Responsibly

We've written before on this site about using credit responsibly if you choose to keep using credit cards in the future. While we don’t actually use them, if you do, using them correctly is a great way to build a positive history to eventually overshadow your less than perfect past.

If you don’t have any current credit cards and you have bad credit, you probably won’t qualify for unsecured credit, but don’t panic. You can open a secured card at your bank using your own cash as collateral. In fact, setting up secured cards for your kids is a great way to teach them how to use credit correctly while they are still living at home (this plan works best for older teens).

4. Frugality for the Win!

You've already taught your kids how to look for bargains and how to determine the actual worth of a thing (for example, comparing the price of toilet paper to the number of sheets on the roll). In addition to continuing to do this, a great example to set for your kids is to, when you turn down the purchase of something that you want but that isn't absolutely necessary, put that money toward an existing debt to pay it down a little quicker.

There are lots of ways to teach your kids about money. Hiding your own money problems from them isn't the way to do it. Be open, be honest and show your kids that you can fight back from monetary distress!

See my disclaimer.

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