Credit Card Quick

Smart Financial Advice for College Students

Introduction

We all know that establishing a strong credit score first begins with being able to establish credit. And with the new onslaught of credit card laws, many students may be left in a precarious position of not being able to secure a credit card to begin establishing credit.

Under the new credit card laws, a college student must be able to prove his or her ability to pay on the card. In other words, if you don’t have a job, you can forget about securing a credit card.

However, even if you are able to secure a credit card, it certainly doesn’t mean that you should have one. If you are not ready to be financially responsible, simply avoid credit cards for the time being. Otherwise, you could find yourself in a big financial mess, even before you graduate from college.

For the remaining college students who want a credit card and are able to afford a credit card, there are a number of things that should be considered:

• Search for the credit card that features the best terms and conditions. Now is not the time to search for rewards and airline cards; instead, concentrate on finding a student credit card that offers competitive terms and conditions.
• Always –  pay your bill on time. There is nothing that could damage your newly found credit faster than not paying your bill on time. And don’t forget about your cell phone or rent, either, as these could also negatively affect your credit if you fail to pay them on time.
• Avoid retail credit cards, as they often come laden with high interest rates and fees. In addition, many consumers are far more likely to overspend in their favorite retail store if they have a store credit card. Your best bet? Skip the store credit cards and stick with one, major credit card for purchases.
• Make a conscious effort to only charge what you can reasonably pay off within a month or two. Credit card debt is sneaky, as the balance can creep up on us and, before we know it, we are faced with a high debt that we simply can’t pay down.

Should I Help my Child Establish Credit?

Credit Score Introduction

We all want to give our children the best start in life as possible, so it only makes sense that some parents want to help their children establish credit. While in general this is a good idea, as it enables your child to begin establishing a positive credit history while still in college, it may also prove to be detrimental to your relationship should your child default on his/her credit obligations.

The bottom line is that, because each child is different, and certainly every situation is different, you must look at all the factors before considering whether to help your child with their credit. For example, you may want to ask yourself the following questions:

• Do I feel like my child is responsible?
• Does my child have the means to pay off his/her debts that they incur (i.e., does your child have a steady source of income)?
• Has my child displayed responsible traits over the past couple years?
• How has my child handled money in the past?
• Have I taught my child about the importance of good credit?

If you answered “no” to any of these questions, you may want to reconsider handing over financial responsibilities to your child. If, however, you feel that your child is responsible enough to properly handle a credit card or other type of installment loan, then you may want to consider using your good credit to help your child establish his/her own credit.

You can accomplish this in one or two ways. First, you can put your child on your credit card as an authorized signer, or add your child to your credit card account as a co-applicant (provided, of course, he/she is at least 18 years old); both of which will help your child establish the credit necessary to begin building a positive credit history.

You may also want to act as a co-signer for a car loan. It is important to remember, however, that if your child defaults on the loan you, the parent, will be responsible for paying the debt or else your credit rating could be in jeopardy.

Both of the above mentioned options require a certain degree of faith and trust in your child, so always proceed with caution when putting your credit rating on the line.