Youth Ill Prepared for Life Changing Credit Decisions

"Too few credit cards can hurt your credit score," said Evan Hendricks, author of Credit Scores & Credit Reports. That's because a thin credit profile doesn't provide as much evidence to lenders that you're capable of paying back your debts on time as the more extensive track record of someone who is responsibly managing several cards and loans.

CNN Money

I really enjoyed this article about managing your personal credit. I think it is incredible sad how ill prepared kids enter society in regards to managing their credit. Most people I know fall into one of three categories:

1. "What's my credit? I could care less."

2. "I have credit cards that let me spend as much as I want. Cool!"

3. "My mom said that credit cards Last House on the Left invented by Satan, so I should stay away."

The number of people, especially young people just starting out, that actually actively work to manage their credit is very small. This is despite the fact that building your credit will probably save you more money in the long run than any 401K or savings account ever could. A good credit score can save tens of thousands of dollars over the life of a mortgage, and puts you in a position to leverage your credit when starting a business or even beginning a new job.

Very few people are aware that the government has injury at work that each of the three big credit agencies, TransUnion, Experian and Equifax, give a free credit report annually since 2004. They don't give you your actual score, but they let you see all the entries in your file, and correct any inaccuracies that have creeped in. This can be viewed at www.annualcreditreport.com, not to be confused with www.freecreditreport.com, which is a sneaky hook by Experian to get you signed up for their service.

As for those people that think credit cards are evil, they should all stop surfing the internet. Yes, a lot of good has happened as a direct result of the internet, but porn is also much more accessible. With any incredibly powerful and life-changing technology, the power is a double edged sword. Used correctly, credit can make your life 10x easier. I use credit cards for every expense in my life, from a $0.99 candy bar to a $2,500.00 computer. As long as you pay it off monthly, the benefits are 3-fold:

1. It's like a 30 day zero interest loan. Your money can sit in the bank or in the stock market and be earning you interest, while the money you spent costs you nothing.

2. You have protection like cash or checks will never offer. If your wallet gets stolen, you just cancel your cards, and even if someone charges something on them, you are protected and usually don't even have to pay a fee to have the charge reversed.

3. Points accrue and you can get some really cool stuff. I get 1-3% of my purchases awarded as Amazon.com gift certificates. Again, as long as you are paying off your cards, that's like a 2% discount on every purchase you make!

That all being said, credit cards have doomed thousands of people to never ending debt, but that isn't the fault of the credit cards, it's because we Americans love accruing stuff. And we wonder why we have such a large trade deficit...but that's a rant for another day.

In short, credit is your friend, and you should spend time improving it, much like you would woo a woman.

Derek Perkins is the CEO of Seatability ( seatability.comseatability.com), a bungee office chair manufacturer and distributor, and former owner of Pocket Innovations, a software company focused on portable software applications. Visit his blog at derekperkins.comderekperkins.com for more information about business, personal finance and ALF topics.