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Youth card hardly benefit by establishing good credit

[Tuesday, October 12th, 2010]

In today`s economy young adults could benefit a great deal by establishing good credit. Young adults need to be guided and educated on the benefits of maintaining a good credit score and establishing a good credit. An individual`s credit worthiness is measure by the credit score and this information is stored by the credit bureau and is used to assess a person`s ability to repay. For instance someone with low credit scores will not be able to avail loans and would also have to incur hefty rates on premiums. Credit cards can only take care of some of the needs and an individual`s needs go beyond that. Credit scores are not only used by money lenders but prospective employers as well. This could be used as a tool to assess the individual`s responsibility on the whole.

The FICO score (Fair Isaac Corporation credit score) ranges from 300 to around 850 and anything above 720 is considered excellent and above 600 is considered good. The score is based on a number of factors such as a good payment record, the time taken to pay off debts, the amount of debts incurred, the frequency with which an individual has applied for a card etc.

In the U.S. alone around 43 million of the people are below 599 due to the sluggish economy. So the credit worthiness of the number of people is not very high.

It is imperative for young adults to remember that they will chart their own courses for the future by being a responsible young adult today. Youngsters need to take care especially during the last years in college, it is better to build a good credit so that it will help in the future.

Some tips that might help youngsters stay on track are as follows:

• One must always pay up the utility bills on time. In the same way one must ensure that payments with regard to credit accounts are also done on time.
• One must limit the number of cards that one uses. Holding multiple cards is not a good idea.
• One must remember to always stay well within the credit limit (preferably under 30% of the allowed limit).
• One must keep a tab on the credit report which is available annually on the websites (one each from the 3 credit reporting agencies).

Students must obtain counseling with regard to financial planning, student loans, repayment etc. Students could obtain confidential counseling with regard to their finances.

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