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Teaching Your Kids to Build Good Credit: The One Tool You Never Knew You Needed

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Teaching Your Kids to Build Good Credit: The One Tool You Never Knew You Needed 1

Teaching your kids about money can be tricky. You want them to understand the value of a dollar without putting undue pressure or stress on them too early on. It’s essential to have productive conversations with your children around money so they can have the knowledge to guarantee their own financial well being when they become adults. One of the most important conversations to have with your kids is on the importance of building good credit, the steps they can take to do so, as well as techniques for avoiding the risks of poor credit. While you may have already thought to educate them on credit cards and loans, there is one tool you may have never considered that can help you underline this lesson. Read on to find out more.

Tradelines – What Are They?

A tradeline is defined as a record of activity for any type of credit that has been extended from a lender to a borrower and is also reported to a credit reporting agency. In short, a tradeline is a record-keeping mechanism that tracks all of the activity associated with that borrower’s account. For each credit account you have, you will have a tradeline. Generally, tradelines are one of the most widely used tools credit agencies use to calculate an individual’s credit score.

Tradelines typically include the following information:

  • The name and address of the lender
  • The type of account
  • Partial view of the account number
  • Current status of the account
  • The date the account was opened
  • The date the account was closed (if it has been closed)
  • The date of last activity
  • The current account balance
  • The original loan amount or credit limit
  • The monthly payment amount
  • The recent balance (only applicable for credit cards)
  • The payment history

The Type of Tradeline You Never Knew You Needed

When it comes to educating your child on the logistics of building good credit, there is a specific type of tradeline that can help achieve this goal: AU tradelines. In this case, AU stands for authorized user. In this type of tradeline arrangement, a parent can add their children to their tradelines as a means of aiding in building their credit. In other words, AU tradelines are the perfect tool to get your kid’s finances started on the right foot as they enter adulthood. By providing your child with this assistance early on, you will not only boost their credit, but you will teach them a valuable lesson on how to “futureproof” their credit management and use such tools to their benefit.

Ultimately, holding constructive conversations with your kids around responsible financial practices is an essential step in guaranteeing their future prosperity. Not only will you enhance your children’s understanding of valuable financial tools, but you will set them on the path to financial security and freedom. The more freedom and stability they have, the sooner they will be able to achieve their financial goals of buying a car, a home, or paying for their education. At the end of the day, you cannot put a price on that kind of peace of mind.

 

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Finance

Guarantor loans surge to top of UK financial complaints chart

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Guarantor loans surge to top of UK financial complaints chart 2

By Huw Jones

LONDON (Reuters) – Complaints about guarantor loans by companies such as Amigo soared last year, eclipsing grievances over payment protection insurance (PPI) that have dominated for more than a decade, Britain’s Financial Ombudsman Service (FOS) said on Wednesday.

Consumers have turned to loan providers since last March as lockdowns to fight the COVID-19 pandemic strained their finances.

“For more than a decade, the Financial Ombudsman Service received an unprecedented number of complaints about PPI. We’re now seeing thousands more complaints about credit – including about guarantor loans,” FOS said in a statement.

Guarantor loans require a friend or family member to guarantee they will take on repayments if the borrower falls behind. Complaints about this type of loan reached more than 10,000 in October to December, up from just over 300 in the same period a year before, the FOS said.

Complaints about other types of home credit jumped to over 6,000 from 430 over the same period.

The complaints about consumer loans usually focused on inadequate affordability checks, FOS said.

Amigo describes itself as Britain’s leader in guarantor loans. FOS said complaints about the company totalled 12,854 in the second half of 2020, up from 1,163 in the first half.

Amigo said it launched a scheme of arrangement, or court-approved compensation process, in January after receiving a high number of complaints last year.

“We are a new leadership team that wants to correct past mistakes in a way that is fair and equitable to all our customers – including our 700,000 past borrowers and guarantors,” Amigo said in a statement.

Provident Personal Credit Ltd was the second most complained about company, with 10,390 complaints in the second half of 2020, FOS said. Provident had no comment.

PPI became Britain’s costliest retail financial scandal that dominated FOS work until the final deadline for complaints passed in August 2019.

(Reporting by Huw Jones; editing by Barbara Lewis)

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Sunak promises to do ‘whatever it takes’ to shield the economy

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Sunak promises to do 'whatever it takes' to shield the economy 3

LONDON (Reuters) – British finance minister Rishi Sunak plans to say in a budget speech on Wednesday that he will do “whatever it takes” to support the economy, and that the task of fixing the public finances will only begin once the country is recovering from the COVID-19 crisis.

“We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people,” Sunak will say, according to excerpts of the speech to parliament released by the finance ministry on Tuesday.

“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis,” he said in the excerpts.

“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that. And, third, in today’s budget we begin the work of building our future economy.”

Britain has suffered the biggest COVID-19 death toll in Europe and the heaviest economic shock among big rich countries, according to the headline measures of official data, after shrinking by 10% last year, its worst slump in three centuries.

Sunak has so far spent almost 300 billion pounds ($419 billion) on emergency support measures and tax cuts.

But Britain has also rushed out Europe’s fastest COVID-19 vaccination programme, raising the prospect of an economic bounce-back once its current, third lockdown is relaxed.

Sunak said in media interviews on Sunday that he would not rush to start addressing Britain’s yawning budget deficit, which is approaching 400 billion pounds – its highest as a share of the economy since World War Two.

Prime Minister Boris Johnson plans to lift lockdown measures gradually, starting with next week’s reopening of schools in England, before most measures are removed by late June.

Sunak is expected to announce an extension of his emergency support measures, including huge income subsidies that are on track to cost more than 100 billion pounds, to provide a bridge for the economy until then.

But he has also said he will “level with people” about how Britain’s 2.1 trillion-pound debt pile would carry on growing without action, which is likely to mean future tax increases.

(Writing by William Schomberg; Editing by Catherine Evans)

 

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UK gilt issuance to be second-highest on record at almost 250 billion pounds – Reuters poll

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UK gilt issuance to be second-highest on record at almost 250 billion pounds - Reuters poll 4

By Andy Bruce

LONDON (Reuters) – Britain is likely to sell nearly 250 billion pounds ($347 billion) of government bonds in the coming financial year – the second-highest total on record – to help power an economic recovery from the COVID-19 pandemic, a Reuters poll of dealers showed on Tuesday.

The survey of all 15 wholesale primary dealers, or banks tasked by the government with creating a market for its bonds, pointed to gilt issuance of about 247.2 billion pounds for the 2021/22 financial year starting in April.

Such a sum marks a sharp drop from the 485.5 billion pounds of gilts that the United Kingdom Debt Management Office (DMO) plans to issue in the current 2020/21 year to finance the economic response to the COVID-19 pandemic.

Finance minister Rishi Sunak is due to deliver his budget around 1230 GMT on Wednesday, after which the DMO will publish its 2021/22 gilt issuance remit.

Sunak has said he would not rush to fix the public finances as he readies a budget, which will add more borrowing to almost 300 billion pounds of COVID-19 spending and tax cuts.

In November, the Office for Budget Responsibility (OBR) forecast borrowing in 2020/21 would reach 393.5 billion pounds, or 19% of GDP, a peacetime record. The latest official data suggests borrowing will fall below this, partly because more taxpayers than expected have opted against deferring payments to 2021/22.

The poll showed Sunak is expected to announce a budget deficit forecast for 2021/22 of 180 billion pounds, 16 billion pounds more than the OBR had predicted in November.

“Our current estimate is that the latest lockdown will ‘cost’ around 16 billion pounds in terms of additional fiscal support,” said RBC economist Cathal Kennedy.

He cited the fact that more workers are now furloughed than the OBR had assumed in November, as well as expanded support for self-employed people and business grants announced in January.

In addition to the budget deficit, the government must also refinance 79.3 billion pounds of gilts due to mature in 2021/22.

As in the current year, much of the issuance will be soaked up by the Bank of England’s asset-purchase programme, which is due to buy around 100 billion pounds of government debt during the next financial year.

The poll suggested the government will finance borrowing almost entirely through gilts in the next financial year, rather than additional issuance of T-bills or via the government’s retail investment arm.

The DMO is likely to ramp up its issuance of inflation-linked gilts in 2021/22 to around 14% of the total, compared with 7% in the current financial year, the poll showed.

The DMO reined in sales of index-linked gilts through most of 2020 due to uncertainty caused by a review into the future of the retail prices index measure of inflation, which is used to price the bonds.

“Given pent-up demand, we think that this target is achievable,” said Deutsche Bank analysts Sanjay Raja and Panos Giannopoulos.

The dealers did not expect much change in the split between short, medium and long-dated gilts. Britain already has a longer average maturity for its debt than any other major economy, but the recent jump in global bond yields has prompted some commentators to say the DMO should do more to lock in low rates.

The government has also said it will issue the first “green gilts” – bonds to finance environmentally friendly projects – in 2021/22. Most respondents expect one or two bonds to be issued, of around 10 billion pounds in total.

(Reporting by Andy Bruce, editing by Larry King)

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