Poor Credit Can Cost Your Kids Their First Job

Much has been done to rein in teen credit card spending; not least, making it harder for kids to qualify for a credit card in the first place. But some items in the news are giving the Bank of Dad jitters. At first blush, it all seems encouraging:

· Holiday spending is projected to rebound The average consumer will spend $689 this holiday season, up from $682 in the comparable 2009 period, projects the National Retail Federation. It's not a big change, but spending is coming back.

· Americans feel their prospects are improving An index of financial confidence calculated by Country Financial recently reversed and registered its first gain in six months. Some folks, anyway, are getting ready to cut loose.

· Personal loans are making a comeback Bank solicitations to consumers for secured loans are up 13%, and many folks are taking the bait. Secured loans outstanding have risen by $1.7 billion since spring, according to the Federal Reserve Consumer Credit Report.

These readings taken together -- two years after the fall of Lehman Bros. and the onset of the worst debt-fueled meltdown in several generations -- suggest that the economy is beginning to mend. That's good. But can we please not dig another debt crater before we've even emerged from the last one? Can we please not set another bad example for our teens, who are especially vulnerable to a new wave of credit-card aggression?

Yes, credit is the grease that makes our economy run and it's great to see the engines picking up steam. But lookout because:

· Banks have begun to loosen standards For the first time in three years; the average credit score of consumers acquiring a credit card has dropped -- to 680 from 692, reports Credit Karma. That translates into another 6 million people (many of them teens and twentysomethings) being newly eligible to get a credit card. Do you think they'll say no? Not likely when...

· Banks are marketing new cards like crazy U.S. homes saw 640 million credit card offers in the second quarter of 2010, up a heart-stopping 83% from the previous year. A lot of these offers are going to college students through direct mail because marketing on campus is problematic under new laws. This blitz comes even as...

· More employers are using poor credit scores to weed out new hires This is perhaps the most critical point for college students thinking ahead to their first job. The median company in the U.S. has been losing $160,000 a year to employee fraud, according to the Association of Certified Fraud Examiners 2010 Global Fraud Study. The most common trait of employees who steal is being behind in their bills. That's why 60% of employers will check your credit before offering you a job. Missing credit card payments is a common student failing that leads to a poor credit score.

The banks may be loosening up again, and you may be feeling better about your and your kids' prospects. But remember how we got here.

If you have a question about kids and money, I'll find the answer. Email me at dankadlec@dankadlec.com.

Photo courtesy Flickr user takomabibelot

Dan Kadlec

Daniel J. Kadlec is an author and journalist whose work appears regularly in Time and Money magazines. He is the former editor of Time’s Generations section, which was written and edited for boomers. Kadlec came to Time from USA Today, where he was the creator and author of the daily column Street Talk, which anchored the newspaper's business coverage. He has co-written three books, including, most recently, With Purpose: Going from Success to Significance in Work and Life. He has won a New York Press Club award and a National Headliner Award for columns on the economy and investing.

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