What Schools Should Teach About Credit: How to Help Your Teen Prepare for a Strong Financial Future

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