College students are prime targets of predatory lenders, from credit card companies that want to drag you down with high interest rates to student loan providers who aren’t all that interested in supporting your education. With so many people after your money, how can you keep your credit intact long enough to graduate?
The key to credit management success during your college years lies in research, caution, and dedication. It’s important to build your credit during this time, but you can’t just take out loans and credit cards willy-nilly. Instead, try these 3 strategies to protect yourself while developing an upstanding credit history.
Be On Time
More than many other types of loan or credit, missing a student loan payment can have dire credit results. Did you have good credit before? Well, a single missed student loan payment can result in a 100-point credit score drop. That could have serious implications for your ability to get other types of loans after college, such as a home loan or a low-interest credit card.
Many college students consider having a car an absolute necessity, even if strictly speaking they could do without one. Over-eagerness to own a car can lead students to invest in something flashy rather than opting for a used car or sharing a car with a friend. This isn’t a good choice.
On the other hand, if you have bad credit that you’d like to improve, investing in a used car can be a great way to improve your credit. If you can pair a hefty down payment with a short-term auto loan, you can repair some of those older credit problems. The key is that you already have to have some money at the ready. Still, it’s often easier to get a car loan than a decent credit card, and you’ll do less damage with it.
Choose Roommates Wisely
Are you ready to get off campus? Renting an apartment is a great way to develop more independence and not living in the dorms can be an ideal way to save money, especially if you have a roommate. The trick is, you need to choose your roommates wisely. If you choose a roommate who doesn’t keep up with their share of the rent, your credit report will reflect their transgressions. Your creditors aren’t interested in hearing that it was your junior year roommate who’s responsible for that dip in your credit score. As far as they’re concerned, choosing a financially irresponsible roommate is your problem, not theirs.
Nobody likes it, but the fact is that establishing good credit is all about being cautious, reading the fine print, and maintaining a conservative estimate of what you can handle. It’s always tempting to accept that larger line of credit or that slightly nicer apartment, but you want to keep your spending under control. The more consistent you are in your borrowing and spending now, the better your financial future.