Monday, October 27, 2008

One report card that doesn't go away after high school

WASHINGTON (10/27/08)--One half of high-school seniors are unaware of the annual availability of free credit reports from the three nationwide consumer credit-reporting companies, according to a study released Oct. 22 by the Jumpstart Coalition for Personal Financial Literacy.

Because most public school systems don't require personal finance education for graduation from high school, the burden is on parents to familiarize their soon-to-be independent children about this lifetime credit "report card."

A credit report provides lenders and other legitimate users such as employers with a picture of a prospective borrower or employee's credit repayment history. Maxine Sweet, vice president of public information for Experian explains how her credit-reporting agency handles information about minors.

"If an individual's name is on an account, creditors are expected to report it regardless of the age. However, by policy, Experian does not report any account information for minors. The information that is collected is stored and updated, but suppressed. When people turn 18, the entire report is made available. Until then, we send a response saying that it's the credit report of a minor and therefore no information will be provided," says Sweet.

So, if you've helped your teenagers build a positive credit history, it will help them when they turn 18 and want to buy a car or get a student loan. "The flip side is that if they don't make payments as agreed, that history will hurt them when they turn 18," cautions Sweet.

Here's how to teach your teenager about credit reports:

Together visit the website for requesting free credit reports and review the frequently asked questions (FAQs). Pay particular attention to details about your right to dispute or correct information in your report.

"Only one website is authorized to fill orders for the free annual credit report you are entitled to under," notes Laura Levine, executive director of the Jumpstart Coalition. "Other websites often claim to offer 'free credit reports,' 'free credit scores,' or 'free credit monitoring.' They are not, however, part of the legally mandated free annual credit report program."

If you are comfortable discussing family finances with your teenager, request your credit report and review it together.

Get in the habit of checking your own credit report regularly. Experts recommend that consumers space their requests for free reports evenly throughout the year so that they're monitoring their credit "report card" every four months. Spurious information can alert you to the fact that you've been the victim of identity theft.

For more information, read "Credit Savvy Is Key to Avoiding Costly Missteps" in Home & Family Finance Resource Center. Have your teenager read "Entering the World of Credit" in C-Note, the high school level of Googolplex.

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