By: Nikki Chasteen
Whether you’re a freshman, senior, graduate student or doctoral candidate, you’ve probably heard about credit your entire life. Your parents have credit and you may even have credit. But if you don’t, don’t stress. Credit and credit cards are difficult to understand. Unfortunately, it is often up to us to learn the dos and don’ts of credit cards.
Albert Williams, NSU’s subject matter expert in finance, teaches a personal finance course. He has a wealth of knowledge on how to start building credit, maintaining good credit and what not to do with your credit cards.
“I recommend all college students get a credit card and practice how to use it,” said Williams.
Build your credit
To start building credit, you must apply for a credit card. This can be an overwhelming process and very confusing, but there are websites and apps out there to help in your search.
“The most effective way to get a credit card is go to your bank and give them a couple hundred dollars and ask for a secured credit card,” said Williams.
The difference between unsecured credit cards and secured credit cards is essential to understand. An unsecured credit card, according to Huffington Post, does not have any collateral associated with it. This means the bank evaluates your ability to pay based on factors such as income and past loan repayment history. A secured credit card is backed by a deposit that you make to the bank. If you deposit $500, then you will have a $500 limit. If you do not pay your bill, or the entire balance, the bank can rely on your deposit to repay the loan.
It is important to look for a few things before applying for a credit card.
“The first thing college students should look at is the cost of the card,” said Williams. “This includes the annual fee to use the card and interest. Interest is the biggest cost.”
Ideally, you would avoid getting a credit card with an annual fee, and Williams does not recommend college students have more than two credit cards. The more credit you have available to you, the more tempting it is to spend. According to CreditKarma.com, keeping up with your minimum payments on your first or second card is more important than opening several credit cards to show you have multiple accounts.
“What’s most important isn’t the specific number of accounts on your credit report, but what you do with them,” said Creditkarma.com.
Maintain good credit
It is crucial to maintain a good credit score. What you are trying to buy, whether it be a house, a car or simply want good credit, will depend on what a good score is.
According to Experian’s website, there are two types of credit scores. There is the FICO score and the Vantage score. The credit score scale starts at 300 and a perfect credit score is 850. Experian states that under FICO standards, a score of 670 or above is considered good. However, the Vantage score standards prefer to give a good credit rating to those who have a 700 and above. Your credit score will vary across the three credit bureaus: Experian, TransUnion and Equifax.
Important tips to remember when using your credit cards
Once you get your credit card, Williams has a few pointers to give students.
“Don’t pay it off in 30 days – the grace period. Pay it off over three to six months. Pay a little interest,” said Williams. “But show that you can pay off a loan.”
The hardest part about having a credit card might be knowing what to spend it on.
“Don’t go fill up the card with things you don’t need,” said Williams.
A lot of cards offer rewards on things like groceries and gas. You can use your newfound spending power on necessities that give you cash back, points towards travel or even a credit on your monthly statement.
Credit is an important part of being an adult. Begin building your credit history early and you will give yourself a jump start when you are ready to buy your first car or your first house.
For more information and resources, visit the Federal Trade Commission’s website at consumer.ftc.gov/topics/money-credit.
