Life without credit is rather unimaginable today. While access to credit may seem easy, anybody who has taken a home loan or a credit card in recent times, will know the importance of improving CIBIL score. In the modern times that we live in, maintaining good credit behavior is a must as it leads to an increase in credit score. A high CIBIL score in today’s date, opens doors of lenders when one is in need of credit and gives one the opportunity to access cheap and timely credit.
Going ahead, there may soon be a time where your credit score may determine the premiums that you will pay for your insurance policies, give you access to cheaper tariffs with mobile and internet service providers and even give you better access to rental apartments if you are looking for one. The point we are making here is that in the future one’s credit score will have a greater impact on everyday life. It is therefore important for parents not only to introduce the concept of credit to young children but also help their teenage or adolescent kids to become credit wise. If you are a parent trying to teach good credit behavior to your kids, here is a ready reckoner you can use if you are wondering how to boost credit score for your kids from the very start.
Catch them young
Introduce the concept of credit early when you teach young children the value of money. Most children see their parents shopping online and offline with one swipe of a shiny piece of plastic. When you think the time the right depending upon the curiosity level of your little ones, simplify the concept of a credit with a practical example.
For instance, if your kid wants to buy a toy or a game that she hasn’t saved up enough for (with her pocket money) tell her that you will loan her the money for a certain interest for the time being. Discuss and agree upon a re-payment date. Tell her that she must save enough pocket money or do extra chores around the house to “earn” extra money to pay the “interest” on time. Harp on the necessity of “full repayment” each time and you will have dinted in good credit behaviour at an early stage.
Get your child a credit card
For older children who are in their late teens or are just starting college you could consider getting a supplementary credit card. Don’t be scandalized at the very thought of it! Not only will you teach your kid a thing or two about being responsible with finances, you can give your child a hands on experience of using a credit card. The good news is that you can have total control over the spending pattern by giving your child an add on credit card. While your card issuer will issue a separate add on card in the name of your child, you will remain the primary user and the payee of bills.
You can keep a strict vigil over her spending pattern and help her understand the need for judicious use of a credit card by checking the credit statements. It also helps your child in more ways than just inculcating good credit behaviour.
Firstly, it helps her to establish credit record (as there is an official credit line in her name) and secondly, having access to a credit card means that she can resort to it in case of an emergency. Hands on experience of using a credit card for a few years in a row will prepare her for money management and credit handling when she is old enough to handle her finances on her own. This is also a good opportunity for your child gain experience in how to increase CIBIL points with the right credit usage.
Lead by example
Lastly and perhaps most importantly, you must get into the habit of a bi-annual check of your CIBIL score if you wish to enhance your credit score. You are allowed at least one free CIBIL check annually that you should take full advantage of. Make it a point to study the CIBIL report together with your child and check for errors if any. Read tutorials on how to study the CIBIL report and study it along with your daughter, so that she has a thorough understanding of how to decode the CIBIL report and has the opportunity to clear doubts if any at an early stage. If she sees you checking your CIBIL report and making a conscious effort to improve your CIBIL score, she will grow up with the same values.
Being credit wise is all about maintaining basic financial discipline. It is not a big deal unless you make it into one. While teaching your kids about how to become credit wise, do bear in mind that you need to set a bright example yourself. Sooner than later you will find your kids following in your footsteps.
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