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BAD
CREDIT
parent to parent
Can be bad for all
Think your bad credit only affects you? It doesn’t.
In general, everyone possesses a credit score representing the likelihood that he or she will pay
back debts. Ranging from 300 to 800, credit scores can be either a blessing or a curse. Great
scores can result in increased loan approval and low interest rates. On the flip side, poor credit
scores do the opposite and may affect not only your financial standing, but your teen’s as well.
Bad credit develops primarily because of missed payments and a buildup of credit card debt.
Generally, about 35 percent of your score is
influenced by payment punctuality, and 30
percent is influenced by your amount of debt.
The rest of your score is affected by length
and types of debt and recently obtained
credit. Car repossession, bankruptcy, apartment eviction and home foreclosure severely
and instantly damage your credit score.
Your bad credit can cause problems when
your teen applies for college. On average,
parents pay up to 47 percent of tuition and
living expenses for their college-age children,
and some parents need to get a loan to provide this help. Loans require credit checks,
and a poor score can keep you from being
approved and from giving your child the financial assistance they need. Plus, bad credit
can make you ineligible to cosign any private
college loans your teen may need to acquire
lower interest rates.
You may want to buy a car or cosign on
a lease for your teen, but bad credit could
mean you’ll be forced to pay interest rates as
high as 16 percent or higher as opposed to
rates as low as 5 percent offered for good credit scores.
Additional effects include paying more when adding your teen to your car insurance policy
and being un