Establishing a credit history is important for young adults. The question is, what kind of story will that history tell? If your college student is at least 18 years old there are many reasons why he might choose to have a credit card during college. With that decision smart choices and responsible behavior are a must for protecting his credit profile.
Consider the following tips:
- Don’t use a credit card for impulse purchases. This is one way credit balances pile up.
- Only charge what he can afford to pay when his monthly statement arrives. Even if he doesn’t always meet this goal, he will have at least the awareness of the need to control credit spending.
- Think of a credit card as an emergency source of funds for essential expenses. It’s better to leave it at home if he could be tempted to make poor decisions.
- If he carries a balance, keep it below 25 percent of his available credit line. Credit rating agencies prefer to see a low credit balance that can be paid off easily.
- Don’t use the credit card for expensive cash advances. These often come with higher interest rates and additional fees.
- Don’t complete additional credit card applications. One card is enough. Applying for credit results in inquiries to his credit record, which will negatively affect his overall credit rating.
It might be hard for him to imagine now, but his behavior in using credit now will impact his application for an automobile loan or a home mortgage later. Let discipline, moderation, and timeliness protect his credit future.
Article provided by Local Government Federal Credit Union.
The advice provided is for information purposes only. Consult your financial advisor for additional guidance.