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Tips for Talking to Your Kids About Credit Cards

How to establish credit

Good credit is something you have to earn by demonstrating sound financial habits. Ways you can begin to establish and build strong credit include:

  • Apply for a small loan and pay it off fully and on time.
  • Open a credit card account and pay off the credit card balance in full each month.
  • Wait until you feel confident that you are managing your spending and payments. Then ask to have the credit limit on your card increased -- but don't increase the amount you actually charge on the card. Remember, lenders like to see a lower ratio of debt to available credit.
  • Before opening a credit card or loan account, make sure the lender agrees to report on-time payments to all three credit bureaus -- this will help build your credit history.

Ways to build good credit

If you are new to credit, it will take time to establish a strong credit history and earn a high credit score. The best way to do it is by using credit responsibly over time. A few suggestions include:

  • Always make payments for credit cards, loans, utilities or other bills on time.
  • Try to pay credit card balances in full each month; avoid making only minimum payments.
  • Avoid keeping your credit card balance at or near the credit limit and don't exceed it. Consistently using most of your available credit can hurt your credit score.
  • Resist applying for numerous accounts, because excessive credit inquiries by lenders can lower your score.
  • Try not to make frequent balance transfers from one account to another.
  • Finally, it sounds silly, but unpaid parking tickets, library fines and other fees can show up on your credit score as unpaid debts.

Brought to you by College Parents of America

Source: Parents, Teens and Money, co-sponsored by Chase and College Parents of America

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