Teenagers, Build Your Credit with
article is for young people just starting to build their credit,
not just for teenagers.
credit can be a very exciting thing.
Once you have your first job and receive a few paychecks,
you are thrilled with all the money you now have to spend. If you are still living at home, you donít feel any need or
pressure to save any money. Many
young people try to keep up with their friends buying the latest
clothes, computer gadgets, accessories, CDís and concert tickets
until you have no more ready cash.
You just found a great outfit for a party
or a date; your low on cash and the store is giving you a 10%
discount if you apply for their credit card.
Wait! Most department stores charge 19-23% interest! If you
are just starting out and have good credit, you can get a much
better rate from other credit card companies; however, this may be
one of the only ways to start getting credit if you have none.
Now, if you still want to get your 10% discount, because this
store frequently gives discounts for using their card, go ahead,
but keep one thing in mind, you need to pay at least 30-50% of the
bill every month or you will be giving back the 10% discount you
thought you just got.
Hereís an example:
owed on account:
you pay it off in full every month, you wonít be charged any
interest at all, unless the credit card company has a special
clause stipulating a minimum, most do not.
continue our example, letís say you charged $200 the first time,
got your 10% discount, so you paid $180. When you received your
bill, you sent in $20. This same store had a great sale with an
additional 15% off if you use your card. You had a party to go to,
so you charged another $200, with your 15% discount you paid $170.
Now you get your bill and letís see what it looks like:
Payment: $ 10.00
you didnít pay your balance in full, you were charged interest
on the $160 left from last month, plus $100 of the new charges
done a few weeks after the first charge, but after the first bill
if you only pay another $20-30, or worse the minimum, you will pay
another $5 and change in interest and this will continue. So after
10 months, you will have paid back the two discounts you received.
This is their intention! If you keep charging this will make it
pay as much as you can each month, without jeopardizing your cash
flow too much. By that I mean, have some money available for
you are first starting out, try your best not to charge too much.
Pay as much in cash as you can and try to save a little money when
you do have extra instead of spending it all. You will have better
credit and less stress.
really hard to be disciplined in the area of spending beyond your
means. Most people arenít and thatís why so many people are in
huge debt. You need to have enough pride and self-confidence to
tell your friends you cannot buy ďxĒ, do ďxĒ or go to
ďxĒ because you donít have enough money. This can be
difficult, especially the first few times. If they are a good
friend, they will accept it. Prioritizing what you want is
helpful. Think twice about that new; out-fit, purse, jewelry,
present for your girlfriend/boyfriend or item for your car.
If you spend less or save your money instead, maybe you
wonít have to say no the next time you want to do something fun.
is important that you be cautious with your credit card
Take each step very slowly and consider all of your options
before making a final decision.
When you have several creditors making offers, it can be
very difficult to decide on which one to deal with.
Follow these simple guidelines when deciding on and dealing
with a creditor:
interest rate are they offering?
interest rate on your credit account plays a serious role in your
ability to keep up with your payments.
Be careful when getting 0% interest rate credit cards. You
are definitely more inclined to over spend, and when the
introductory rate, as it usually is, runs out, you will have to
start paying interest. Try to get a 0% credit card that has a
decent rate when it runs out. 8-10% is fairly average and a good
they charge a yearly fee? Nowadays, if you have good credit, you
can get credit cards with no yearly fee. Be sure to read the page
with the information on all the various fees you can be charged.
are also credit card companies offering cash back bonuses and
travel miles. I would first look at getting a low interest rate
and no yearly fee, then if one of the other bonuses apply, great!
your payments on time.
not make late payments. Keep your bills organized so you know
exactly when they are due. Send them 6-10 days before they are
due, depending on where they are located. Credit card companies
generally charge $15-35 per month if you are late, plus it will be
reported on your credit report. Making on time payments will keep
your credit score high and you will have more options in the
not apply for credit more than 3 times a year, 4 max.
you do, you can easily be denied credit because those actions are
perceived as shopping for credit.
If you are suspected of shopping for credit, your creditors
will deny you. You
can keep track of how many times you have applied for credit and
with whom by looking at your credit report.
Your credit report shows all the people who have inquired
into your report for the last 2 years. After 2 years, the listing drops off your report.
Once you begin paying a creditor, take it slow. You are
going to get many credit card offers, and it is extremely tempting
to take them all up on their offers.
all of your receipts and contracts
all of your receipts for payments made to any creditor.
Yes, creditors have been known to misplace a payment
received, letís hope it isnít yours.
Rest assured if it is, providing you kept your receipts. Saving
your contract with any creditor is highly advised.
In the event that a dispute should arise, the creditor will
be sure to throw in comments concerning your agreement and
signature on the contract.
most important thing to do when building your credit is take
pride, protect it, respect and especially enjoy it.
Having good credit is a luxury and can widen the horizons
of possibility for you and your future, providing you pursue your
credit with caution.