College students have enough to worry about without adding the qualms of credit cards to the mix. At the same time, college is a very good time for young people to learn about credit.
The college years should be filled with experience and knowledge. Most of the things a young person learns during this time of life will be in class, but some of the best lessons can only be learned through life experience. How to responsibly manage credit, for example, is one of the most important rites a passage a college student should experience in order to ensure the best possible start after graduation.
Thus, here are 5 smart money moves college students can make in regards to their credit.
First of all, if you are a college student who wants to learn about credit so you can use it later in life, you need to get a credit card. In previous decades this would have been extremely easy but recent credit card reform has restricted credit card companies from pursuing and approving applications from young college students, particularly those who do not have a stable and substantial income to support credit card payments.
Still, a basic credit card with a modest credit limit is one of the most powerful credit building tools because it will establish a solid payment history and give you a credit-to-debt ratio. These are the building blocks of a strong credit report.
Once you have a credit card, you will need to learn how to use your credit responsibly. In terms of college one good strategy is to use your card to purchase your books and then pay off the balance quickly; if you can do it within the first month’s billing statement you are in very good shape. Remember to only charge things that you can already afford and pay them off quickly. Avoid other services like cash advances and even foreign transactions because they can carry fees that can quickly add up.
Now that you have been developing a bit of a credit history and learning about responsible credit behavior you’ll need to start monitoring your account to make sure that your information remains accurate. Recent credit card reform has instituted the Fair Credit Reporting Act, which provides every consumer with access to a peek at their own personal credit report every single year.
Every person in the United States, then, is able to look at each of their credit reports from each of the three credit bureaus: Experian, TransUnion, and Equifax. This process only takes a few minutes but could be the best thing you ever did to improve your credit.
Fourth, and this one probably seems obvious, do not be a sucker. There was once a time when you would find credit card offers littering college campuses. People seemed to be giving them away; and that was kind of the point. Credit card companies made it very easy for college students to get approved and then made the offers too good to resist.
Unfortunately offers like these are often also too good to be true. While you may find that the credit offer isn’t worth the inherent value you initially believed, the true disappointment lies in the fact that once you fill out a credit application, your personal information is available, and that can lead to identity theft too.
Finally, avoiding the annual fee is one of the best smart credit moves you can make. The annual fee offers you absolutely no benefit. It is basically a royalty that you pay just to carry the credit card. If the card you want requires an annual fee, keep looking; you’ll find something comparable, sans fee.