Our college-bound son just bought his first home at 21. He 
was able to buy a home for forty thousand under the appraised 
price, get a low interest rate, finance the closing costs, 
and pay no money down. How could he possibly do this? His 
credit score is over 700.

You can help your teenager prepare for his or her financial 
future by establishing a high credit rating. Offer your 
teenager these three crucial credit tips for a great 
financial future:

1. Start early. Begin by successfully managing a checking 
account-- the first credit requirement. Wells Fargo Bank has 
a program for children to open joint accounts with a parent 
as young as 13 years of age. For a free individual checking 
account, Washington Mutual requires a minimum age of 18 or a 
manager's approval for younger account holders.

2. Apply for a major credit card at 18. It's easier to get a 
first-class credit card with favorable rates and terms while 
a student attends college before the age of 22. Why do banks 
want to open accounts for students who have no credit history 
or employment? Because lenders know that college graduates in 
general make more money and also pay their bills on time. 
Also, most consumers don't like shopping around for credit 
and tend to keep their credit accounts. Therefore, lenders 
desire to establish strong relationships with the preferred 
market early in their credit experience.

This doesn't mean that you as the parent need to co-sign; 
banks expect parents to help out with the payments when 
necessary. Just be crystal clear with your child what you 
expect regarding debt management. The purpose is to teach 
responsibility and to establish credit--not to go into debt.

3. Manage the credit card account with credit scores in mind. 
Once the account is opened, encourage your child to use the 
card for necessities that would be purchased with cash--not 
luxuries--and to pay the debt before finance charges accrue. 
However, don't pay the entire balance off each month; let a 
little roll over at least every two months. Banks don't 
appreciate accounts paid in full each month. More important, 
paid accounts don't factor into the credit score as much as 
an account with a low balance.

Explain to you teenager that the purpose of using a credit 
card is to establish good credit. To do this, a credit card 
should never have a balance over 50% of the available credit. 
The best credit scores have accounts with only 10% of the 
credit line used.

Setting up a checking account and a credit card account helps 
your teenager learn about responsible money management, with 
the bonus of building strong credit to finance a home. 

Copyright (c) 2005 Jeanette J. Fisher.  All rights reserved.

Professor Jeanette Fisher, author of Credit Help! Get the 
Credit You Need to Buy Real Estate, Doghouse to Dollhouse for 
Dollars and other books, teaches Real Estate Investing and 
Design Psychology. For more credit articles, tips, reports, 
and newsletters, see http://www.recredithelp.com