Young adults need to strive for financial independence to achieve a credit history
A growing number of young adults are going without a credit history as more parents are choosing to put mortgages, loans and phone payments in their name. However, this policy could have an adverse affect in the future.
An increasing amount of young people are depriving themselves of a credit history as one quarter of parents are putting credit agreements in their own name.
compare-prepaidRecent research has found that approximately 12% of adults, which equates to just below six million people, do not have a credit agreement. This includes four in ten aged under 30 years old.
While most parents feel they are helping their children out, experts are claiming that the practice could mean young adults may find it difficult to be approved for a loan, mortgage or credit card in their own right in the future.
Tom Ilube, founder of online credit report service Noodle, said: “Parents have nothing but good intentions, but the irony is that they could be putting their own children at a big financial disadvantage.
“Without some form of credit history, getting a mortgage, or even a mobile phone contract, could be problematic.”
Lenders of large and important loans may refrain from approving loans among adults without credit history as it is this information that helps them determine whether or not the individual will be able to cope with the loan and repayments.
Experts are encouraging young people to transfer their mobile phone contracts in to their own name, regardless of whether the parent pays the bill or not.
They are also claiming young adults who want a credit card should spend a small amount each month on the card and repay it in full at the end to demonstrate to future lenders of their ability to repay borrowed money.
It is vitally important, however, that young people avoid debt at all costs. Therefore, young adults looking for credit cards should compare the market to make sure they get the most rewarding rates.