by Penny B

Created on: September 12, 2007

Having a good credit rating is very important these days. As a teenager, you're probably not really thinking too far into the future and that someday you will need to mortgage and furnish a home, or finance a vehicle. By learning to have and maintain a good credit rating at an early age, these things can be far more attainable in your later stages of life. Many people's dreams of buying their first home are dashed because they had never built up a credit rating. A bank will not lend them money for a mortgage without that credit rating.

Some would argue that a teenager has little knowledge or constraint when it comes
to spending money, but I think by learning good spending habits at an early age, one can avoid many of the pitfalls that many adults find themselves in these days by over spending, over indulging and living strictly on credit. All good habits need to be learned and instilled while young.

A lot of credit card companies will start you off with a low credit limit. This is good for the credit card company and a low risk for both you and them. This is also good for the first-time card holder, as it teaches you that there ARE limits, and the balances are so much easier to manage. Although, if they see that you are paying your balance off with regularity, they will offer to increase that limit. Depending on the income, if any, of a teenager, one must consider this very diligently. You can always decline the higher credit limit and that would probably be a good idea in the beginning. Just keep the limit low and a good rating will be so much easier to attain.

Also, in the beginning, never charge items to the limit you are allowed. You can
still build a good rating by only charging small amounts and then paying off the balance when the statement arrives. It's also a good idea to pay off the balance as soon as possible, as the interest rates won't double the cost of the purchase(s) you made.

Also advisable, is to limit ones self to ONE credit card. Sometimes several credit card companies will send applications once they find out that you are keeping your balances paid. It can be very tempting to fill out those application forms and have a card for every department store in town. In order to build up a credit rating, one card is all you need. The more cards you have, the better credit you'll build does not apply. You can still maintain an excellent credit rating by charging up small amounts. Paying off a $20 balance is just as effective as paying off a $2000
balance.

You must remember, a credit card is not "free" money. There is a huge responsiblity
in handling money of any kind, even credit. Learning good money handling skills at
an early age, can be very beneficial in those later years of life.

Learn more about this author, Penny B.
Click here to send this author comments or questions.