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Importance of building and maintaining credit

Credit can be a foreign concept to college students, but it’s just another form of responsibility, really. However, if you’re not careful, you could end up with more debt than you need. So why use it, right? Well, building and maintaining credit can start to look a lot more urgent when you realize how many things you need to use it for.

For example, paying for college, buying/renting a home and even finding a job all weigh on your credit, according to Discover. Also, most rental agencies require a credit card before moving on with any transaction. Even employers can request to look at your credit before they hire you.

“When students graduate and begin applying for jobs, many prospective employers will ask to obtain their credit report to gage their responsibility, honesty, maturity and ability to be given authority over valuable assets entrusted to their care,” said William Buchanan, a professor of finance at VSU.

So, now you know some of the big aspects in life that require credit. The next step is to know why a good credit score can give you the most beneficial payment options out there.

“I always caution my students to take care of their credit score like they do their GPA,” Buchanan said.

Having good credit can help with student loans because it can ensure your qualification for the lowest interest rates and the best terms, according to Discover. This helps paying them back after graduation easier.

The same concept applies for buying homes and cars. The best mortgage interest rates and affordable loan terms are typically reserved for customers with the best credit. Even now, you need a credit card to perform every day transactions. Some examples are booking a hotel and online shopping, according to Discover.

When you know what aspects can raise your credit, the next step is learning how to build it efficiently. According to Discover, one option for building credit is a secured card. This is the process of providing a security deposit at the time of application. Then, if you regularly use the card and make monthly payments on time, you will begin your journey of building credit.

However, applying for a credit card is not the only way to build credit, according to Buchanan.

“Borrowing for student loans or a car is also a good way to build credit, and if they are renting an apartment, their timely payment of rent may be reflected in their score as well,” he said.

According to Erin El Issa and Bev O’Shea of Nerd Wallet, the best way to build your credit is by practicing good habits. Make all of your payments on time and always pay in the full amount. Paying the minimum will hurt you in the long run because the payment will only add up, and this is how you build up debt. Check your credit reports regularly for any errors.

Buchanan suggests looking for certain details when applying for a credit card.

“Low interest rates that stay low, along with a cashback feature, are good and stick with the mainstream credit card companies like Citi, Capital One or any Visa or MasterCard issuer,” Buchanan said. “Also, never run your balance due above 50 percent of your credit line. Maxing it out will lower your score even if you make timely minimum payments.”

If you want to check your credit score, make sure you use sites that allow you to do this for free. Some sites will either charge or put a dinge on your score that will lower it for credit monitoring. Websites such as Credit Karma and Nerd Wallet are some of the sites that will let you check your score without any charges.

Buchanan’s last words of advice are for students to start looking toward their future.

“Patience, maturity and responsibility,” he said. “Students need to take the long view. One day they will have the capacity and opportunity to borrow significant sums, unless they get started off on a bad foot and ruin their chances right out of the gate. Good debt is debt you can handle easily; bad debt is something that suffocates your life, causing you to live from paycheck to paycheck.”

Story by Alex Dunn, Campus Life editor. Photo courtesy of TheDigitalWay on Pixabay.

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