Give Yourself Some Credit

By Elizabeth Lehman

At 18, a person has their whole life ahead of them. They also have their entire credit line ahead of them. Many college students might not realize it, but taking the opportunity to build a positive credit score matters as much as maintaining a good GPA.

According to Consumer.gov, credit history describes how you use your money. It details how many credit cards you have, how many loans you have and whether or not you pay your bills on time.

A person’s credit score and history is important, Peter Chen, associate professor of accounting and finance at the Williamson College of Business, said. Not only does it affect interest rates, it impacts job opportunities and insurance rates, too.

“The insurance company might look at it, so if your credit score is low, your premium might be higher,” Chen said. “One of the biggest concerns for students is the potential employers. They take a look at your credit score. If your credit score is low, you might be denied of a job.”

Poor credit can also affect a person’s housing situation, Chen said.

“Your landlord looks at your credit score as well. So, you have a bad credit score, you’re going to have trouble with housing eventually. You might have trouble getting a mortgage, and your landlord might not lease anything to you,” Chen said.

Having no credit history at all is not a good thing for your credit report, either. Franks Soles, assistant professor in the management department at Williamson, said having a credit history is crucial.

“If you pay for everything in cash, you never show up on a credit bureau report,” Soles said. “It can be a detriment in today’s world. There’s an awful lot of business that’s done based on that credit bureau history, and if you don’t have it, you don’t dance.”

Having a good credit history demonstrates that the person is able to be trusted, Soles said.

“Credit scores are today’s version of ‘Can I trust you?,’ but the sad part of it is, it’s taken a lot of people out of the equation,” Soles said.

One way to begin to build a positive credit history is to start off with a secured credit card. A secured credit card acts almost like a gift card. It only lets the owner spend money that was already prepaid on the card at a previous date.

Another way to get a credit card is to have someone co-sign.

“You have someone co-sign your card with you, like your parents. That means if you don’t pay, your parents are responsible for your payment,” Chen said.

Soles said one of the biggest mistakes students think upon getting their first credit card is to think the credit is free money.

“It’s not. It’s an instant loan that you have to pay back over time,” Soles said. “And the longer you take to pay it back, the more it costs you. The costs are huge in credit cards.”

Soles said to be careful about credit, use it like a tool to get ahead in the world, not to put you behind.

Chen said it is imperative for students to consider their credit today for their future, even if they are trying to make ends meet in college.

“Don’t treat it lightly. When you’re young, the mortgage, car loans, a job is far away in the future. So don’t mess up your credit when you are in college,” Chen said. “It’s very easy to get excellent credit. I think the most important thing is live within your means … and have a budget.”

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