Goodbye all-nighters, and hello 9 to 5s! Congratulations on your recent graduation, college grad. Now that you have obtained all of the college credit needed to graduate from your alma mater, the next stage of adulthood is all about obtaining and building another kind of credit. According to a study done by Opportunity Financial, seven out of ten college students damage their credit soon after graduation. This is due to a variety of different factors including missed payments and excessive credit card debt. Educating yourself about credit is immensely important whether you have good credit, bad credit, or no credit.
If you’re looking for credit repair answers, then you have come to the right place. Read on to learn about the credit facts you need to know as a college graduate.
1. Remember that credit impacts your everyday life
As you went through the hustle and bustle of college life, you may not have had to experience how important credit is. But, the truth is that credit has the power to impact many different aspects of your life. From the place that you live to the car that you drive and even your preferred cell phone plan, the status of your credit score can affect it all. Choosing to better your credit will inevitably better many different aspects of your life, and gives you the power of choice. When you have good credit, you have the power to choose from many different possible apartments, cars, or cell phone plans. If you have bad credit or no credit, your choices are going to be slim.
2. Don’t be scared of credit cards
Credit cards hold a lot of weight to them and can destroy your credit score if they are not properly used. But, that doesn’t mean that you should completely stray away from them. Credit cards are one of the best ways to build your credit. You might want to look into a secured credit card, which utilizes your security deposit as collateral for your line of credit. These are good choices for people with no credit history at all or a bad credit history.
3. Make your payments on time
When it comes to credit, the most important thing to remember is to pay your payments on time every time. Your payment history is the most important factor in calculating your credit score, catering to 35% of your score. But, life happens, and you may miss a deadline now and again. If you do miss a payment, pay it as soon as possible. Credit bureaus don’t consider a payment late until it is 30 days past due. You still have time to keep your credit in line even if it’s been a couple of days past the deadline.
4. Be wary of your credit card spending
When getting your first credit card, it can be easy to think of it as free money. But the truth is, you’re just borrowing it. You have to pay that money back. Also, don’t make a habit of using your entire credit line at once. A good rule of thumb is actively using about 30% of your credit line, at the most. If you can stay at a lower number, that’s even better. This relays the fact that you’re a responsible spender who’s going to pay back their debts on time.
5. Don’t co-sign for others
Now that you’ve got a brand new fancy credit card and you’ve been making responsible choices, you may find that your under-21 friends want you to be their co-signer. Thanks to the Credit CARD Act of 2009, it’s gotten increasingly harder to get a credit card if you’re under 21. But, when you co-sign for one of your younger friends or family members, you’re putting your own credit at risk. If they don’t use their credit lines responsibly, your credit score is going to suffer in the process. When it comes to your credit, don’t feel bad about looking out for yourself and being a little selfish.
6. Don’t close your student credit card
If you’ve previously had a student credit card, you might be thinking about closing it. I mean, you’re not a student anymore right? But, if you have had a student credit card, you should probably keep it open. Credit history plays a sizeable part in calculating your credit score; about 15%. Especially if you made responsible decisions with your student credit card, you should pay off any underlying balances and keep it open.
7. Pay down your student loans
After you graduate, the dollar amount of your student loans can seem very intimidating. Most student loans have a six month grace period after your graduation date. But, if you can start paying them off before, do so. The faster you start paying off your student loans, the better your credit score will be because of it. Your debt to income ratio doesn’t affect your credit score directly but is a huge part of maintaining your overall credit health and being a responsible spender.
8. Remember your frugal habits from college
Your frugal habits from college are often what saves you a ton of money in adulthood. This doesn’t mean that you have to go back to the ramen noodle dinners and $1 pizza nights though (unless you want to!). Some frugal tips that are good to remember are to be sure to take advantage of student discounts, use coupons, and buy second hand if you can. All of these tips will help you save money and be the responsible spender that you’ve always been.
Whether you have good credit, bad credit, or no credit, it’s never too late to start prioritizing your credit score. Making good choices with your money, and in turn, your credit will help you get a car, an apartment, and even a new cell phone plan in the future. But, you don’t have to make drastic changes right after you step off of the graduation stage. The small steps you can make with your credit can make a huge difference in the long run. One day your credit score will surely thank you because of your hard work and consistency.
