What They Should Teach in College
There is one lesson that no one teaches in college, even though it’s a lesson everyone should learn. Unless you are a business major, no one teaches you how to handle anything financial. Companies and banks assume that someone somewhere taught you about credit. Well, maybe someone told you that you need credit to get the things that you want in life, but no one really tells you more than that. The phrase “If you don’t have it, you can’t get it,” comes to mind when the word credit is mentioned.
There are real advantages to having good credit. If you have good credit, you can find a better place to live and anyone will rent to you. You will be able to afford a better car. Later in life, when you buy a house, you will get a better mortgage rate. If you have good credit, you can get a good rate on any loan you need. If you don’t have good credit, doors seem to slam in your face. If you try to get a car loan or a mortgage, the interest rates will probably break you, if banks decide to take a chance on you at all. Employers who check your credit report may not hire you, because a bad credit report reflects poorly on your personality and reputation. But if you are a college student, you are in luck. The credit rules that apply to everyone else will bend (slightly) for you.
Credit card, banks and financial companies are willing to take a chance on college students because parents will probably be paying the bill. In college, not only do you have the chance to get a credit card, but you are offered credit cards every day, along with offers like tee-shirts, perfume, Frisbees and hats. Most of the time, the credit card isn’t advertised, just the give away. When I first got to college, a sophomore gave me one piece of advice, “If you see a sign that says ‘Free T-Shirts,’ Run…”
My friend wasn’t wrong. Applying for a credit card in exchange for a free t-shirt is not a good idea. Even though creditors will take chances on America’s youth, creditors also assume that students never read contracts. But you’re not going to be duped by a give away, are you? You’re going to build your credit like a responsible college student, right?
Open a checking and savings account: First of all, you need to have a way to pay your bill. Second of all, a checking and savings account make you look responsible to credit card companies.
Apply for one or two credit cards: As a student, you should start to build your credit by having one or two credit cards, but DO NOT apply for them on the street for a free tee-shirt. Also, do not have more than two credit cards at a time. Acquiring a lot of credit cards makes you look irresponsible. The best place to apply for a loan or for a credit card is at your bank. All banks have special accommodations for students. American express has a fee-free card available to students, which comes with special service perks. Avoid credit cards that annual fees and APR over 18%.
Only spend what you can afford: You didn’t get that credit card to buy everything in sight. You got that card to build up your credit. Overspending is a common mistake that gets a lot of people into trouble and into debt. If you are going to use your credit card, only use it for small purchases, which you know will not break your bank account.
Pay your bills on time: Credit card interest is very expensive. But, if you pay your bill as soon as it comes in, you don’t have to pay the interest. Also, paying your bill on time will make you look responsible. However, even making one late payment will ruin your credit for a very long time.
Avoid maxing out: As a student, your credit limit will probably be around 500 dollars. Never go near your limit. Maxing out your credit card looks absolutely terrible on a credit report. Actually, you should keep your charges to about one third of that amount. If you hit your limit, put the card in your drawer and pay your debt back ASAP.