This is a great article from MINT for helping students understand the implications of some of their decisions concerning credit during their college years.
Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.
I opened up several credit cards within the first semester of college. Each time, I earned some sort of cool promotional item – a shot glass, a tee-shirt, a Penn State keychain. When the cards arrived in the mail a week later, I didn’t really bother to use them and when I did, I wasn’t aware of the fine print. When bills arrived in the mail, I just paid the minimum balance, thinking that was all well and good. I had no idea what I’d really gotten myself into.
College can be a popular time to establish credit. According to a survey by credit reporting agency Experian, 58% of soon-to-be college graduates possess a credit card, making average monthly charges of over $500..
Opening a credit card when you’re young can be a helpful way to achieve a strong credit score in the future. The length of your credit history is equal to 15% of your FICO credit score. The earlier you establish credit, the longer your credit history becomes and credit score calculators consider this a plus.
But it can only work to your advantage if you commit to managing credit responsibly and educating yourself on the rules and best practices surrounding credit usage and credit health. This includes credit cards, student loans and other types of credit.
Specifically with credit cards, since 2009, the laws have changed whereby those under the age of 21 cannot open a credit card without a cosigner or proving they can afford to make the payments (i.e. have income). The CARD Act (aka The Credit Card Accountability, Responsibility and Disclosure Act), which implemented this rule, also bans banks and card issuers from marketing credit cards to college students.
Still, there are smart and responsible ways to establish credit when you’re young. Here’s the credit advice and education I would have given my 18-year-old self back in the day.
Click here to continue to the 7 Things College Students Should Know About Credit. We hope this article serves you, or someone you pass this advice along to, well!