College is an institution established with the intention of preparing bright young folks for the future. Here we not only earn our degrees but establish ourselves as productive members of society. A part of doing this lies in establishing and building a good credit score.
SANS THE SALTCollege is an institution established with the intention of preparing bright young folks for the future. Here we not only earn our degrees but establish ourselves as productive members of society. A part of doing this lies in establishing and building a good credit score.
A credit score is looked at for virtually any financial transaction in which money is being borrowed or a contract is being signed.
When you finally graduate and go to purchase your dream car, the dude from the car lot is going to run a credit check before giving you a loan for that beautiful 1988 Ford Aerostar. The report he gets back will determine the down payment, interest and the amount of money he’s willing to lend you.
The fastest way to build up one aspect of a credit history is to open a credit card. This card, if you feel ready for one, should be used as a financial tool and never to just “treat yo’ self.”
I’ve used mine to spread the pain of paying a large speeding ticket over a few months, as well as for purchasing textbooks before being reimbursed by student loans. These aren’t the expenditures that your parents worry about, though—it’s when your Starbucks and $80-sweater habits get put onto the card that you need to consider cutting it.
A credit card should be thought of as a loan that has to be paid back the next month, not in several years. If you have to pay for groceries on credit, the solution isn’t to increase your limit, but to reevaluate your finances.
If you don’t think you’ll have a steady income and know that there’s a chance you may not be able to pay even the minimum payment, don’t even consider applying for a credit card.
The Obama administration recently started requiring credit card companies to verify student incomes before issuing credit cards, but it’s really up to you to decide what you can afford.
It’s incredibly easy to fall into debt, and the repercussions of damaging your credit score can outweigh the benefits of your initial attempt to build a good score. There are things you should consider before applying for a credit card, chiefly: Can you afford it?
The minimum payment on a typical card is around $30–50 per monthly depending on the company and your credit. This is a very digestible sum of money, but it increases as your balance increases, and if you have multiple cards it’s easy for debt to become one of your largest income-guzzlers.
While they may not directly impact your credit score, there are other factors that lenders take into consideration, especially if you lack retail credit. For example, a lender may check to see if you pay your bills on time. It’s also beneficial to have held a job for an extended period of time; in fact, it can be almost as useful as a good score.
There are 50 million American adults who don’t have credit history. Having credit is not a necessity—it will just make purchasing things like a house or car easier.
So before you jump on the first credit card application that graces your mailbox, know what you’re getting into, and know how to say no to that awesome $400 sweater you don’t really need.
