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National Foundation For Credit Counseling

August 19, 2010 by staff 

National Foundation For Credit Counseling, It is not uncommon for students to come home for holidays with some new and interesting ideas, some extra kilos and a couple of tattoos.
But here are something more college students not to bring home this Thanksgiving: a credit card.

Credit card reform law enacted last year prohibits lenders from issuing cards to persons under age 21 unless they can prove they can make payments or get a parent or guardian to sign together. The provision came into force on 22 February, so that when he begins college this fall, students will not be received by CC issuers covered pizza coupons and T-shirts.

The requirement is to prevent students from accumulating debts that cannot afford. But it could also avoid us of credit cards responsibly to build a good credit profile.

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Young adults who graduate from college without a positive credit history might have difficulty qualifying for a car loan, rent an apartment, even get a job, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.

Even with the restrictions, parents can help college-age children build a credit history. Alternatives to consider:

• Add your child to a credit card as an authorized user. In doing so, the child can use the card, but you are responsible for the account.

The history of the payment card will be reported to credit bureaus on behalf of his son, which will help the child build a credit history. Parents, meanwhile, can track how the card is being used.
If it appears the child is misusing your card, you can have the child removed as an authorized user before things get out of hand, says June Walbert, a financial planner with USAA Financial Planning Services.
There are some drawbacks. If your child is running a huge bill and cannot afford to pay, your credit will be damaged. Similarly, if you lose your job and fall behind in their credit card payments it, the damage is not limited to your credit report. The story of her son will be tarnished credit, too.
Another drawback to authorized users is the amount of available credit.

If you have had your card for a long time, you could have a credit limit of 10,000 or more y. Parents have to think hard about whether they trust their children with a lot of credit before adding as authorized users, Walbert said.

• Co-signing a credit card for your child. This card is the name of his son, so it also helps children build a credit history. As a co-signer will receive a monthly statement, and the limits of the credit card cannot be increased without approval.

And because the card will be issued in the name of your child, you probably have a lower limit of its own credit card, which limits the amount of damage he or she can do.
But as the co-signer will be responsible for the debt if the child cannot make the payments, Walbert said.
Furthermore, “If there is a late payment or a payment or underpayment, if they go beyond their limit, which will reflect negatively on the credit report from the parents,” he says.
Another potential drawback: As co-signers, you and your child have the same control of the account, says Cunningham, which means it cannot close the account without the consent of his son.
For that reason, the addition of one child as an authorized user is generally a better option than co-signing a credit card, says Cunningham.
“If you put your student on your existing credit card as an authorized user, you have total control of that letter,” she says. “If Junior does not comply with the rules, I will not be asking your permission to close the card.”
• Find out if your child is still eligible to a credit card. Some college students who earn a part-time employment may be able to qualify for credit cards with no cosigner, Walbert said.
The card can have a very low limit, but that’s not a bad thing, because it limits the amount the child can go.
• Have your child a debit card. With a debit card, you can control the cost of your child, and replenish the account when necessary.
The disadvantage of debit cards is that they will help your child develop a credit history.
However, if your goal is to teach children to manage money responsibly, have a debit card is a good first step, says Cunningham?
“Say:” If this person is, you get a credit card. “”

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