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Three Simple Rules for College Students to Build Good Credit
From a personal finance perspective, young college students have youth, time and inexperience on their side. Lack of credit card experience and virtually no credit history means that these young students have not had the time to develop bad credit, accumulate toxic credit card debt, or adopt poor credit habits.
Unfortunately, credit card companies also know that naive college students are a good source of business and set up shop on college campuses across the country trying to entice students into a future of huge interest rates and growing debt with the lure of free shirts and electronic gadgets.
Consumer reports tells us that: "The average balance students carry is $3,173–higher than in any previous studies. Only 17 percent of students pay off balances each month, with the majority paying interest rates averaging 14 percent on their mounting debt load." That means that college students, many of whom do not have a working income, are signing up for high interest credit cards, running up large balances and not having the ability to pay off the balance.
While bad credit will haunt you for years and should be avoided like a bad sexually transmitted disease (as opposed to a good sexually transmitted disease), building good credit is just as important as avoiding bad credit. So here is poorMD's prescription for building the good while avoiding the bad:
Unfortunately, credit card companies also know that naive college students are a good source of business and set up shop on college campuses across the country trying to entice students into a future of huge interest rates and growing debt with the lure of free shirts and electronic gadgets.
Consumer reports tells us that: "The average balance students carry is $3,173–higher than in any previous studies. Only 17 percent of students pay off balances each month, with the majority paying interest rates averaging 14 percent on their mounting debt load." That means that college students, many of whom do not have a working income, are signing up for high interest credit cards, running up large balances and not having the ability to pay off the balance.
While bad credit will haunt you for years and should be avoided like a bad sexually transmitted disease (as opposed to a good sexually transmitted disease), building good credit is just as important as avoiding bad credit. So here is poorMD's prescription for building the good while avoiding the bad:
- It takes credit to build credit: Starting February 2010, new rules will make it so that those under the age of 21 will need to show proof they can make payments or have a parent co-sign. Even so, because it takes credit to build credit, finding a good credit card and using it responsibly is important for building good credit history. If signing up for a good credit card means abiding by some ground rules so that mom and pop will co-sign, then so be it.
- Make the first one, a special one: A credit card virgin should not settle for the first booth they happen to come across while walking to their first day of freshman orientation! Just because some credit card pushing skank offers you a free T-shirt or an Ipod, does not make their particular credit card the most chaste deal. Find a credit card with low rates that stay low and with no annual fees at www.Bankrate.com and www.CreditNet.com.
- Always ON TIME and Always IN FULL: As previously stated, bad credit will bury you while good credit will exhalt you. Always pay the balance in full and always on time. If you can't afford to pay something off, then it's time to stop using the card until you can.