The Benefits of Having a Credit Card in College

Most people will advise you to refrain from applying and/or using a credit until after you graduate from college. The reason why: credit card companies target young college students. These companies understand that you are still at an age where your parents will foot the bill if necessary and most importantly – they want to reap the benefits of the long credit life you have ahead of you. Fear not. You can use this to your advantage and here’s how:

Rental applications
Your personal dorm room is the first step towards your independence as an adult.  At some point, you will want to move off campus and rent an apartment with your friends or rent an apartment on your own. Either way, the landlord will perform a credit check. Having an extensive and well maintained credit history will prove to beneficial as credit card companies will view you as a high-quality candidate.

The longer the relationship, the better
The earlier you begin a positive relationship with a credit lender, the better it will look on your credit report once you graduate and begin your transition into adulthood. A proven track record of good credit will assist you with obtaining a higher credit limit or switch to a card with different/better benefits.

Emergencies
If you do choose to apply for a credit card while you’re in college, it is highly recommended that you either use it for small purchases that can quickly and easily be paid back or just use it in cases of emergency such as:

  • Unexpected dental or medical expenses
  • Emergency flights, bus, or train rides home
  • Emergency car rentals

It will be tempting to use this credit card for for items that do not necessarily count as emergencies. Practice self restraint and be sure to track your spending.

The benefits of having a credit card in college are abundant, but accountability and self-awareness need to be practiced regularly. Know your limits, spending habits, and make sure you are responsible enough to maintain a good credit history.

Credit Report Myths Debunked

The realm of credit and credit scores can be confusing to many. Financial literacy is hard to come by and for the most part, difficult to understand. It is important that we all perceive the significance of  what hurts and helps our creditworthiness. Here are a few of the most common credit myths debunked:

Myth #1: Checking your credit is bad for your credit score
Let’s be clear, checking  your own credit has no impact on your credit score. However, applying for a loan will typically have some effect. You should be checking your credit score regularly. Should you happen to see a significant dip in your score knowing you did not recently apply for credit, then there may be some foul play at hand. Identity theft is real and it is imperative that you routinely check the status of your credit.

Myth #2: Marital status is reflected on credit reports
Research shows that at least 44% of consumers have no knowledge of the  Equal Credit Opportunity Act (ECOA) – regulations that forbid a creditor’s scoring system to use certain characteristics as factors. These characteristics include:

  • Marital status
  • Race
  • Gender
  • National origin
  • Religion

Although marital status is not reflected on your credit report, you must remember that both the credit scores of you and your spouse are taken into account when making joint purchases or applying for loans together.

Myth #3: Late payments on utility bills are reflected on credit reports
Truth be told, most utility companies opt to only report late payments or payments that have gone to collections, while other companies report both on-time and late payments. Do your best to make on-time payments and pay off any outstanding bills to avoid the damaging effects those may have on your credit score.
The simple truth

You are in control of your credit score. Do your research, do your best to make on-time payments, and use a budget to ensure you are keeping track of your finances to avoid overspending.