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April 8, 2013
A common concern I hear as a banker is “my son/daughter needs a credit card to establish his/her credit.” If you are a parent faced with such an issue the first thing that I would recommend is to pull your son or daughter’s credit report via www.annualcreditreport.com so that you know what is on their report, if anything. Take a moment to review with your student what is on the report and make efforts at that time to correct any derogatory or inaccurate information on the report. The next step would be to contact your local bank where you have a relationship to visit with them about opening up a credit card account with, say, a $500 limit for your child, with you or your spouse as a co-borrower. Another option would be to use cash or a CD to secure the credit card if you do not want to be a co-borrower.
Never let a credit card company choose your student as a customer. Your son or daughter may receive enticing credit card offers in the mail or online as they begin school. Please read the terms and agreement on any credit card offer that they receive and make certain you and they know what each card’s fees and interest rates are to make sure they are competitive.
If you are a student, some tips you might want to consider when using credit cards: when you get your credit card you can use it for everyday purchases just about anywhere. However, it is best to always try to pay your card in full each month so as not to carry balances. Cash advances are not recommended and they are not really as attractive as them seem. Some credit card companies may charge you a 2-4% advance fee and they might even separate the cash advance balance from your normal purchases to charge you a higher rate of interest on the cash advance portion.
Remember to stay within your credit limit to avoid any over the limit fees. Do not let your friends use your credit or credit card for their purchases. You are the borrower and will have to answer to the bank if your friend does not pay you back and the bill is still due. It is always a good idea to not mix friendships with finances. If you get in trouble with the card, talk to the credit card company and do not be afraid to close the card if needed. It is always better to communicate with your lender rather than potentially damaging your credit. You cannot expect your parents to bail you out, you are now on your own and your credit is your responsibility.
Remember, your credit report is your personal “report card” and contains information on your Identity, your current and past credit payment history, terms, balances on loans, etc., your public records (i.e. tax liens, judgments, foreclosures, bankruptcies, etc.) and inquiries that you have made for new credit. I have seen several instances where a family has gone car shopping over the weekend and ended up with multiple “inquiries” on the credit report which ultimately had a negative effect on their credit score. Nevertheless, you as the consumer now have the information to review, correct, and improve your credit.
There are three credit reporting agencies - TransUnion, Equifax, and Experian. As consumers, parents, you or your student can access your personal credit reports free of charge once every 12 months at their respective websites:
Another good website to learn about your credit and credit score is:
This website is maintained by the Board of Governors of the Federal Reserve System. Their website has good information on credit reports, why they are important, who is collecting information on you, where do they get their information, how you can correct errors on your report, how you can improve your credit score, and much more.
Finally, do you get a constant flow of credit card and unsolicited credit offers in the mail? Did you know that credit bureaus might sell your information to creditors, insurers, and the like based on specific credit criteria? If you want to stop receiving those pre-screened offers you can “Opt-Out” by calling 1-888-567-8688 or visiting www.optoutprescreen.com. You can opt-out for five years online or calling the toll free number. If you want to opt-out permanently you will have to download a form from the website, complete, and mail it back to them. If you change your mind and want to resume receiving credit offers you can call the toll free number or visit their website to do so.
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