You’ve graduated from high school and looking forward to attending college this fall. Entering college is your first big step into adulthood. Many students find themselves living on their own away from their parents for the first time, and this brings on many responsibilities including financial obligations.
College is when many young adults are first introduced to credit cards. Over 75% of all college students have credit cards. Using them wisely is key. Making financial mistakes early can impact your credit score for years, and create future hardships when trying to get an apartment, buy a house, get the lowest insurance rates, even a job– as many employers are checking your credit as a qualifier for job applicants.
Below are some helpful hints on how to establish and manage credit wisely.
- The first and easiest way to start building credit is to become an Authorized User on Mom or Dad’s card. This will help you build credit, and have instant access to their credit line—you want to make sure they have good credit
- Research and get a student credit card prior to going to college—look online for the card that offers the best rate, APR, reports to all 3 bureaus, and has no annual fee. Only apply for one card—too many credit applications will lower your score.
Do not get a credit card on campus! On August 22nd, the credit card act final installments went into place. This act had specific rules regarding credit card issuing to students such as Credit card issuers are banned from issuing credit cards to anyone under 21, unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt. And now, Credit card companies must stay at least 1,000 feet from college campuses if they are offering free pizza or other gifts to entice students to apply for credit cards.
3. Now that you have a credit card, manage it wisely. Use credit card wisely, keep debt low (below 30%), make payments on time, and after 6 months of use, pull your free credit report to make sure everything is reporting accurately—if not, file a dispute on any inaccurate information—for dispute contact information as well as a sample dispute letter, please go to http://www.mcmf.net/MCMF_EXCEL_FILES/Sample%20Dispute%20Letter.pdf
4. Once you have established some credit, you may want to apply for another credit card, or line of credit. Slow and steady building of credit is essential. Start small and once you have mastered managing one credit obligation, you can apply for another.
I cannot talk about establishing credit without also discussing the potential for ID theft. Unfortunately, identity theft on college campuses is on the rise. College students live closely with each other, spend a lot of time on the internet and are routinely asked to divulge personal information such as their social security number in order to access files, register for classes, etc. That combined with statistics that show a large percentage of students are not diligent in keeping up on their checking account balances or credit card balance and are not careful about destroying documents containing personal information before discarding them, is a recipe for disaster. Becoming victim to ID theft could wreck your credit score for years, and keep you from getting the best financing possible on down the road. The key is prevention.
Below are some tips to help you avoid identity theft
–Opt Out—over half of all college students receive pre-approved credit card offers in the mail every week! Not discarding of these properly, or moving and not notifying the post office of your change of address, could leave your pre-approved credit offers in the hands of an identity thief. This is the number one best protection from identity theft—plus students won’t be tempted by pre-approved offers in the mail. http://www.mcmf.net/MCMF_LSLink6.html
–Write down all information, drivers license, social security card, insurance card and credit card with all account info and contact info—keep in a safe place at home with mom and dad in case you lose your wallet. Go to the MCMF website for information on how to contact the bureaus and place a fraud alert on your credit file if you have been a victim of ID theft. http://www.mcmf.net/MCMF_FAQLink3.html
Student loans– In 2010, graduates who took out loans left college with an average of $24,000 in debt. At the same time, given federal and state-level budget cuts, more and more people are turning to private lending as a source for their student loans.
Student loans are debt, just like any other type of debt and are reported to the 3 credit bureaus. Use student loans wisely. Do not borrow money to cover living expenses—use student loan money for tuition and books. Student loans do appear on your credit report and not paying them in a timely manner will negatively affect your credit score.
Remember the key is to graduate with as little debt as possible. This includes credit card and student loan debt.