Teaching Responsible Credit Card Use

It's an unfortunate fact that most students never get formal lessons in managing their credit and debt. For many young people, their first brush with being responsible credit card users won't come till they are in college - away from home and the guidance of mom and dad. The moment they step on campus, new college students will be wooed by major credit card companies, all of them eager to establish themselves as 'the first card in your wallet'.

If your child will be going off to college in the fall, one of the best things you can do for him or her is to get them started on the right foot to handling credit responsibly. Needless to say, example is the best way to teach. The more responsibly you handle your own credit card use, the more likely it is that they'll absorb your attitudes toward the use of Credit Cards.

Beyond that, though, one of the easiest ways to teach responsible credit card use is to cosign an application for one of the Credit Cards that is especially designed for student use - and do it before they're off on their own. Each major credit card line features at least one credit card that has low credit limits ($500 to $1000), no annual fee and a moderate APR.

Make a big deal about applying for the credit card. Explain to them that each credit card application they fill out will be noted on their credit report - high school students especially understand the concept of a 'permanent record' - and that the more Credit Cards they apply for, the worse their 'permanent record' will become. That way, when they hit campus, they'll be forewarned against the myriad credit card companies telling them 'it's no big deal'.

Show them how to compare Credit Cards and figure out what credit will actually cost them. If you're not sure of it yourself, see our articles about Annual Percentage Rate and how to figure out the cost of a credit card. Make sure that they understand what a 'late payment' is, and how it will affect the charges on their credit card. When they understand that making a payment late will add $29 to their bill this month, AND increase their APR so that every bill from now on will be higher, they're far more likely to appreciate the significance of making payments on time.

Finally, before turning them loose with a credit card, take the time to sit down with them and work out a loose budget they can follow. Then make a monthly date to sit down and go over the credit card bill and credit card receipts together. You'll be able to monitor spending and help them work out ways to stay within budget while still paying off their credit card properly.

It's a common aphorism that it takes only 7 days to establish a new habit. Take a few months before your student heads off to college to help them establish good, responsible credit card habits. It's a lesson that will last them the rest of their lives.

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Get Inside Your Credit Rating

What do you know about your Credit rating? You may never even think about it until you get turned down for credit one day. However, the way you run your life may affect the way your credit profile looks years later.

Who Stores Credit Information?

There are two main agencies that store information about your credit history. They are Experian in Nottingham and Equifax in Glasgow. The credit file is opened the day you open a bank account. The longer you have had a bank account, the more trustworthy you seem, so it's best to keep one primary account for the sake of the credit report. That doesn't prevent you from having a second account that might offer other incentives, such as a better overdraft limit or interest rates.

Your credit score goes up depending on what services you have from the bank. So, if you have a cheque account, a savings account, a credit card and other products, this means the bank trusts you and is a big plus for your credit status.

On A Roll

Whether you decide to vote or not, it is a good idea to appear on the electoral roll. This makes it easy to track and confirm your address details. Lenders will be concerned about whether you own or rent your home, or whether you are living with parents. Owning your own home is a sign of responsibility, and the fact that you have been approved for a mortgage looks good too. It's best to have a telephone at home. If it is working, it means that you are up to date with your bill.

Stability And Responsibility

Responsibility is also the key factor when it comes to marriage and children. Being married with children means, in theory, that you are responsible. It also means that you are less likely to run off, leaving bad debt behind you. And the older you get, the more responsible you look in lenders' eyes, so there are some advantages to ageing.

Having a job is an indication that you will be able to repay any credit that you get. Again, staying in the same job for a while indicates responsibility. Lenders like to see some history of earning an income before they approve a loan.

Managing Credit

Finally, having credit really helps your Credit rating, as long as you have managed it well. Having credit agreements is good, as far as lenders are concerned. Making the necessary repayments on time is even better. Missing payments or defaults will lower your credit score, so they are best avoided.

If you do end up with a debt problem, arrears or County Court Judgements (CCJs), you may still be able to get credit. There are options such as payday loans for short term credit and secured loans for long term credit. There are even Credit Cards that cater for people with a poor Credit rating. However, the interest rates will not be as good as those offered to people with a good credit report.

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