Teens starting out

Submitted by Lunchtime on Sun, 01/13/2008 - 21:44

How a teen can start out and stay credit card free. There are are a few ways to build credit besides credit cards.

Take out a loan, put the loan money in a savings account as collateral, pay on the loan monthly. A younger person may need a co signer, a parent or another adult may have to do the co signing or post collateral. This does not have to be a huge loan, $500 should be enough and try to take it out for at least a six month time frame to get a good history established. From there a younger person has a really good start on credit and can continue to borrow, probably with out a co signer on the second loan depending on the age of the youth.

This is a much better approach than applying for high intrest credit cards that if you fall behind on, they will ruin you for the next seven years, or until you give into an unforgiving collection agency who hounds you to pay. If you fall behind on these cards there are also outrageous fees, both late and the over the limit fees.

I see there is a lot of advice on here for young people starting out. This is a great article for my young daughter. I am pretty confident that if she decides to apply for something while in college that she will come to me with the application and we will review the details, the fine print as many of you put it, very thoroughly.

This loan as collateral seems like a good idea, it would definately be a good way to start out and the interest through a bank would be a lot cheaper than that of the traditional card. So it would actually be cheaper to do it this way than to pay the high rates of the credit card.

You would also avoid the risk of the huge late payment fees and the risk of ruin of your credit as you say.

This is something to definatley take into consideration. When my daughter starts college and has her part time job, I will be happy to co sign for her, she is a very responsible girl.

Mon, 01/14/2008 - 21:03 Permalink

I am glad you agree, I think it is a good alternative to the typical credit card.

Mon, 01/14/2008 - 23:00 Permalink

I also find this a great idea to build credit. My son got 2 credit cards for the same purpose and fell into the trap. Now his credit is shot at the age of 21. I have 2 daughters coming up now and I will more likely go with your suggestion for earning a credit history than the credit cards. Thanks for that information.

Wed, 01/16/2008 - 14:58 Permalink

This would work for a young person starting out. hummingbird, sorry to hear your son, he is just 21 he has plenty of time to clean it up. Hopefully, he will see it this way.

Who does he have the cards with, just curious? If he could find out who has them right now, he may be able to get a hold of the collection agency and see if he can pay a little at a time to get it cleared up.

Wed, 01/16/2008 - 23:06 Permalink
Anonymous (not verified)

Yes he had the coverage on one if case he was out of work.But he lapse in contacting them and they canceled his coverage and never paid a thing to catch him up. He also received an offer for a pay off but he had no money to accept that offer at the time.His insurance coverage was so high and with gas prices what they are he did not have enough left to pay any one.One card was with Chase.

Thu, 01/17/2008 - 14:27 Permalink

They don't have much mercy on their customers, nor do they care why you are late. Credit card companies are among the most viscious when it comes to turning over to the collection agencies who then just pursue you like a hound dog.

Best thing to do is to try to keep up with them, if you can't then deal with them when you can, do not commit to any payment plans that you can't make to have another broken contract.

I don't know much about chase, but I am sure that they are like the others when it comes to pursuing delinquent accounts, relentless.

I hope your son can find a way out of this mess and maybe get a better paying job that so that he can afford his insurance and other bills. Goodluck with guiding him through this, we are all here to figure out ways of helping so please post his progress.

Thu, 01/17/2008 - 23:57 Permalink