In today’s tough economic credit market, it’s harder than ever for someone starting out on the road to financial responsibility to establish strong credit.  Knowing how to increase your credit score as well as avoid debt as an adult.  A few key credit facts can go a long way toward helping teens and young adults establish a positive credit history that works in their favor when it’s time to start making big decisions. 

1.  YOU DON’T HAVE TO USE CREDIT CARDS TO START A CREDIT HISTORY:  Most people open a credit card account and vow not to only make a few small purchases to begin a credit history.  In most cases the charges on the card become more frequent and payments are less often and before you know it the card is maxed out.  It is advised to start a credit history with accounts other than credit cards to show your responsible financial behavior.  collaborating with a responsible adult to put another account in a teen’s name, such as a telephone, cable, garbage, or other bills can show a positive credit history.

2.  GO GREEN AND CARRY CASH:  It is really easy to swipe a card every time you make a purchase, but in most cases it is difficult to really know how much money is being spent each day.  When you carry cash, it is easy to see how much money is available until your next payday.  Seeing the cash can help you decide if the purchase is really important and ensure you have the funds available and avoid debt.   

3.  KEEP YOUR CHANGE:  When you are using cash, you have an opportunity to receive change that can be used as a savings.  Decide what works best for you whether it is having a change jar at home that you fill up every night, or it is removing all the dollar bills from your wallet each day and saving them.  Having an extra savings set aside is great for buying something extra or for unforseen expenses. 

4.  AVOID DEPARTMENT STORE CREDIT:  Never sign up for a department store credit card.  They catch you when you are reaching for your wallet, stressed about spending money and offer you a great deal.  They offer you a discount on your purchase just for opening an account.  They do this because they know they will make a lot more on fees and finance charges when you charge your purchase.  In most cases the department store finance charges are way higher than a regular Visa or MasterCard.

5.  GROW INTO A CREDIT CARD:  If you would like to get your child ready for a credit card, think baby steps.  Start with a pre-paid card that allows them to spend only the money that has been put on the card in advance.  Next open a checking account that allows them to use a debit card.  Make sure to remind them to only spend money that has been deposited in advance and avoid overdraft fees.  When they are ready for a credit card, start with a low limit low fee card to be used for small purchases and paid each month.

It is very smart to have the credit talk with your kids often.  More than 80% of graduating college seniors have credit card debt before they even have a job.  With the job market as tight as it is today, they may not have a way to repay their debts after graduation.  Make sure your children start early and have the knowledge they need to avoid credit pitfalls.