What Schools Should Teach About Credit: How to Help Your Teen Prepare for a
Strong Financial Future
Copyright © 2004 Jeanette Joy Fisher
Real Estate Credit Help Center
http://www.recredithelp.com/
Our college-bound son just bought his first home at 21. He
was able to buy a home for forty thousand under the appraised
price, get a low interest rate, finance the closing costs,
and pay no money down. How could he possibly do this? His
credit score is over 700.
You can help your teenager prepare for his or her financial
future by establishing a high credit rating. Offer your
teenager these three crucial credit tips for a great
financial future:
1. Start early. Begin by successfully managing a checking
account-- the first credit requirement. Wells Fargo Bank has
a program for children to open joint accounts with a parent
as young as 13 years of age. For a free individual checking
account, Washington Mutual requires a minimum age of 18 or a
manager's approval for younger account holders.
2. Apply for a major credit card at 18. It's easier to get a
first-class credit card with favorable rates and terms while
a student attends college before the age of 22. Why do banks
want to open accounts for students who have no credit history
or employment? Because lenders know that college graduates in
general make more money and also pay their bills on time.
Also, most consumers don't like shopping around for credit
and tend to keep their credit accounts. Therefore, lenders
desire to establish strong relationships with the preferred
market early in their credit experience.
This doesn't mean that you as the parent need to co-sign;
banks expect parents to help out with the payments when
necessary. Just be crystal clear with your child what you
expect regarding debt management. The purpose is to teach
responsibility and to establish credit--not to go into debt.
3. Manage the credit card account with credit scores in mind.
Once the account is opened, encourage your child to use the
card for necessities that would be purchased with cash--not
luxuries--and to pay the debt before finance charges accrue.
However, don't pay the entire balance off each month; let a
little roll over at least every two months. Banks don't
appreciate accounts paid in full each month. More important,
paid accounts don't factor into the credit score as much as
an account with a low balance.
Explain to you teenager that the purpose of using a credit
card is to establish good credit. To do this, a credit card
should never have a balance over 50% of the available credit.
The best credit scores have accounts with only 10% of the
credit line used.
Setting up a checking account and a credit card account helps
your teenager learn about responsible money management, with
the bonus of building strong credit to finance a home.
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Copyright (c) 2005 Jeanette J. Fisher. All rights reserved.
Professor Jeanette Fisher, author of Credit Help! Get the
Credit You Need to Buy Real Estate, Doghouse to Dollhouse for
Dollars and other books, teaches Real Estate Investing and
Design Psychology. For more credit articles, tips, reports,
and newsletters, see http://www.recredithelp.com
