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.

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FREE Credit Report Offer – Careful, It Might Carry Hidden Charges

FREE credit checks or free credit reports. What are they all about? Why every second company on the Net is offering you a free credit report? Are they all suddenly moved into a charity business?

Don’t worry about their finances. Start worrying about yours. They are offering you a FREE Credit report as a bonus. Their main offer is something else – they want to sell you “credit check monitoring services”. They claim they are going to protect you from identity theft.

In order to do that, they first ask you about all the details about your credit card and your bank accounts. Talk about a cat watching over cream distributions.

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How Business’s Mess Up Their Credit Policies

In “Become the Squeaky Wheel” a book recently published, Michelle Dunn demonstrates the major areas a business should focus on to ensure a satisfactory customer experience.

One mistake business owners make is not having a credit policy in place when they open their business. This can be easily corrected by implementing one at any time. “At the very least, every business should have every customer fill out a credit application,” says Dunn.

“In the businesses view, it seems easier to just process the order without obtaining any or limited information on the customer. Most new business are so excited to make the sale they don’t want to offend the customer by asking them to fill out a credit application,” explains Michelle Dunn.

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Your Credit Score

Credit scores: all lenders use credit scores to determine interest rates and credit limits.

The credit scoring system was developed in the early 1950′s. However, it was not widely utilized until the early 1980′s, when it was overhauled by Fair, Isaac & Company. At that time the 3 major credit reporting bureaus, Equifax, Experian and Trans Union, worked with FICO to create three separate credit models, one for each bureau.These agencies still use their own criteria to rate credit holders but the numbers have been normalized so that a score of 650 at Bureau A is equal to a score of 650 at Bureau B, etc.

Simply put, a credit score is a mathematical equation calculated by the review of a potential applicants credit history. It is based on factors such as income, instances of late or missed payments, types of debt owed, number of credit inquiries on file and the percentage of available credit that is actually being used.

Credit scores generally range between 300 and 800. The average credit score lies somewhere between the 600 and 700 range. As a rule, in order to receive a standard, lower cost loan a score of 620 or above is required. A high score indicates a low credit risk, meaning those with high scores find it very easy to obtain credit.

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