Your credit score isnít something you think about very much growing up. Why would you? Youíre not looking to buy a car or buy a house in high school, but you really should be aware of your credit and how it works from the first moment you apply for an account with a debit card. After all, your credit is what determines your ability to open credit cards, apply for car loans and to someday buy a home of your own. If you mess up your credit right out of high school, that problem can last a very long time Ė up to ten years Ė so always play it safe.
Start Building Credit
There are two bad scenarios for credit Ė having bad credit and having no credit. You have to create bad credit by missing payments and maxing out credit cards, but everyone starts with no credit at all. If you want to build up your credit, youíll want to start small as soon as youíre ready to take on the responsibility of making payments and watching your credit lines. It might not be until youíre in college, or it could be earlier. Your first step is to open a bank account with an attached debit card. The debit card might not be real credit, but itís a small step to practice with. Once youíre sure youíre not going to go overboard, youíll move on to a small credit card.
The best places to open your first credit card are the places you donít visit every day. Your favorite fashion store, for example, might have a program for students attending college or young adults over eighteen. Even if the store only gives you $200 to spend on your credit line, treat it like treasure. Never max out the card and pay it off promptly. Showing that you can take care of the card is going to build your credit enough that other companies are willing to take a risk.
Open a Big Credit Card Carefully
When you go to open your first big credit card, look for the best terms you can find. Avoid any monthly or annual fees and look for a card that has some sort of reward. You can earn points toward small gifts or travel, but never charge just to charge. Think of that credit card as cash in your account. Every time you charge something, youíd better have cash on hand in your checking account to pay for it. If not, youíll soon find yourself in a cycle of debt that is very hard to break. Again, never max out your credit card and use it as you would use cash. Credit is not real money; itís a loan that will have to be repaid very soon.
Establish Good Practices Now
Having a credit line of over $1,000, or well over that amount, can be very tempting when there are things you want that you might not otherwise afford. Want to eat out with friends? Why not! Itís just $10 here or there. Soon all those little purchases, and perhaps even a big buy that you just couldnít live without at the time add up dramatically and youíre stuck with a bill bigger than you can afford and no money left to buy the basics.
Sometimes youíre lucky enough to have your parents there to drag you back out of debt, but other times you skip payments or even stop paying the cards before you realize what youíre doing to your future. Things can spiral out of control very early and the consequences are brutal. Always stay on top of your credit cards and use them wisely. If you do, youíll have the credit you need when itís time to buy your first car or your first house. If you donít, youíre looking at a long road of credit recovery.