Bad credit home loan online

By the time Jamie Brown of Alpharetta, Georgia, was 18, he'd received dozens of preapproved applications for credit cards. Amazingly, he hadn't solicited a single one.

"It started when I was 17," the teen says of the deluge. "They came in the mail, but I also got them online. One time I filled out an online form for a sweepstakes. I guess that's how they got my name. After that, they just threw them at me."

The high pressure credit card pitches were aimed straight at a teen's heart. "The e-mails were directed at me personally," says Jamie. "They read, `Jamie, here's something free for you.' They offered me a free T-shirt if I filled out the application."

Fortunately, Jamie followed the advice of his parents and avoided the rush to own plastic. Other youngsters, however, are not so wise.

According to Nellie Mae, a national student-loan financing corporation, 83 percent of undergraduates hold at least one credit card. But the amount of debt they're carrying is very adult. In 2001, the average outstanding credit card balance was $2,327. Twenty-one percent of undergraduates with cards maintain a balance of between $3,000 and $7,000. Even more shocking, almost 20 percent of 18-year-olds hold four or more credit cards.

Clearly, credit cards are something parents should discuss with their kids. But it's also clear that many parents are not doing this.

"In recent years, we've seen an increase in teens coming in for counseling," says Bill Cullinan, chief operating officer of the National Foundation for Credit Counseling, a nonprofit network that provides credit advice. The credit industry is competitive, and there is a great deal of credit available, he says.

Spelling out the facts of credit life to your children is essential. The problem is that many parents aren't sure about what to say. "Parents themselves don't always possess the skills to teach (money management) to their kids," Cullinan says. So many youngsters wing it.

Here are the eight basic rules of owning a credit card.

1. Credit is not extra cash. "Kids need to understand that credit is not their money," says Dara Duguay, a financial-advice author and executive director of the Jump$tart Coalition for Personal Financial Literacy, a nonprofit education organization. "I know that sounds really basic, but kids think an offer of a credit card with a $500 limit is like a gift, like $500 in their pocket." But there's a charge for using plastic--and that's called interest.

2. Credit costs money. Credit card companies exist to make money, and they do it when you run up debt on their card. Here's how it works: If you charge $1,000 and pay off the minimum amount each month on a card with an interest rate of 17 percent, it will take you 12 years to pay off the balance and you'll have shelled out $1,979--nearly double what you spent. But, says Duguay, if you invested that same $1,000 over the same 12 years at 10 percent, you would end up with $3,138.

3. Bad credit follows you everywhere. "Young people often don't realize that bad credit can have negative consequences," Duguay says. "And most negatives stick around for seven to ten years." Credit reports are routinely examined when buying a car, renting a house, or even applying for a job. Your interest rate can go up, as well.

4. Plan ahead. "The best defense against running up credit card debt is a budget," says Cullinan. Kids should figure out how much money they'll earn from a summer or part-time job and then estimate their expenses, such as a night at the movies. They may be shocked to discover how much more they're spending than earning. If the money isn't coming in, don't charge.

5. Credit is for necessities only. Truly discretionary items, such as makeup and CDs, should always be bought with cash. "It's very, very easy to lose track of the total amount you've charged," says Cullinan. Use cash instead of plastic for everything but big-ticket items, and you'll buy less.

6. Stay within the grace period. Credit card companies allow you a certain time frame before you must make a payment. You usually have several weeks alter the statement arrives. It you use this time to earn enough to cover your outstanding balance and then pay in full by the due date, you aren't charged interest.

7. Credit cards are not all the same. Some charge 17 percent on an annual basis, others as low as 9 percent. Some charge an annual fee for the use of the card, others don't. And one may offer longer grace periods than another. To compare, visit bankrate.com or cardweb.com.

8. When no won't do. If kids simply must have plastic, there's a new solution: Prepaid credit cards that look and work like the real thing, except parents control spending limits. They work like a debit card--put money into a card account, then charges go against that fund. The card can be used online, at ATM machines, and any place credit cards are accepted. To learn more, visit Dibz.com, Visabuxx.com, or Mastercard.com.

And finally, permitting your child to obtain a credit card can be a good thing. Without established credit, young adults must often put down large cash security deposits for an apartment or car lease. "Companies want to see you have a proven track record of paying your bills," says Duguay.

But perfect credit doesn't simply mean making minimum payments on time. The outstanding debt is also key. "A lot of kids think they need a ton of credit cards to develop a credit history," Duguay says. "But they only need one that they pay off regularly. What they need to show is that they're responsible."