16. July 2010 12:41
A few weeks ago, I had the opportunity to make a presentation on credit to fifty teachers attending a four day training on financial education. It was great to see so many interested and intrigued faces in the crowd. They have a difficult task- explain credit to people who see it used by adults but won’t be able to access it for a while. Not to mention keeping track of the changing laws, trends and uses for credit scores. It can be daunting but I suspect that group of teachers are up for the challenge. Their students may not remember everything but what they do remember will give them the edge in building a stronger credit history. This is going to be essential in the future.
FICO recently announced that 1 in 4 consumers are now considered to be a poor risk for lenders. Figures showed that 25.5% of consumers- almost 43.4 million consumers- have a credit score of 599 or below (source: MSNBC). The heavy reliance of credit card spending prior to the “Great Recession” in conjunction with the effects of the recession on the economy are starting to show in the credit scores. Creditors have also adjusted credit lines and criteria to reduce their risk. People with the lowest score are less likely to seek loans at this time but those caught in the moderate credit score range (650-699) are going to feel the results of the tightening market. Those with top scores of 800 or above will still be able to access the lower rates. This brings home the point of setting up the next generation so they have a good understanding of how to build credit and the importance of getting off to a good start.
Talking to kids about credit doesn’t have to be boring. Mint.com has created a fun video “Quest for Credit” for young adults. It touches on the key points of using credit cards responsibly. Check it out: http://www.youtube.com/watch?v=a8BYVLc8Ev4