Credit Cards & Credit Scores

As college kids we are a prime target for credit card companies. It seems I can’t go 3 weeks away from home without returning to find 4 or 5 new letters from banks and companies wanting me to sign up for their card. Companies hope that as college kids we are not smart enough to weigh the consequences of just swiping a card. The more we spend, the more we owe them. If we can’t pay, we get a warm introduction to that interest rate they claim is so low. So why would we ever want to try and sign up for one of these credit cards? One huge benefit is your credit score.

If you’ve ever attempted to take out a loan, you probably know that your credit score can have a drastic impact on whether or not a bank is willing to loan you the money you need. With a higher credit score you are more likely to be able to obtain it, and you may even get a lower interest rate.

So the question on everyone’s minds is, how do I get this higher credit score? The key answer is to make your payments consistently and to pay the entire amount you owe. Yes you can make the minimum payment every time, but that will not help your score as much and will only build your debt. Companies hope you only make the minimum payment so that your total debt goes up. As your debt goes up, it increases the amount they can charge you interest on. To improve your credit score, here is what I recommend:

1: Don’t spend money you don’t have—seems simple, but many forget it.
2: Only charge things that you know you can pay off in full when your payment is due.
3: If you are able to get a credit card, do your research on the one that meets your specific financial situation the best.
For your research, I recommend finding a card with a reasonable credit limit and lower interest rate. If you happen to miss or pay the minimum on a payment, with a lower interest rate you won’t get killed on interest. Try to make up for it next time though so it doesn’t compound on itself.
4: Make your payments on time.

For student loans, avoiding the use of a credit card to make tuition payments is beneficial. If not, try to work a job and work on paying off the debt by making more than your minimum payments. If you must have student loans, do research on your own loans; some loans offer the ability to not have to make payments until after school, or have interest rates that are very low. What you do depends on how you are paying for tuition.

If you can do those 4 things, you can help improve your credit score. The earlier you can establish a good credit rating, the easier it will be to obtain credit when you need it.

Article by Erik Witt, SMMC Volunteer

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