Master Your Card

We all know college is a lasting experience that stays with us for the rest of our lives – sometimes in ways we wish weren’t the case. In any event, there are seven things college students can do to ruin their credit and believe me, I did them all. Where was this information when I went to school?

# 1 – Abusing Easy Credit

It’s common knowledge that students can easily be approved for credit cards, they don’t even need a job. However, it’s also very easy for students to spend themselves into a hole they can’t get out of. Once a student steps foot on campus, they’re inundated with credit card offers. Once they max out one, they apply for more and it turns into a vicious cycle. All of this adds up to the thousands upon thousands in student loan debt they’re likely to accumulate as well.

My advice: Don’t get a credit card unless you know how to use it and have a job with income coming in to repay it.

# 2 – Missing Payments

We come back to the fact that most students have very little to no income, so sometimes they just don’t have the money to make a payment. Skipping a payment is worse than just paying the minimum every month. On top of interest continuing to accrue on that balance, you’ll get a late fee – which accrues interest as well – and have a ’30 day late’ noticed tacked on your credit report. That stays on your report for seven years and is visible to any future lenders.

My advice: Don’t skip a payment. If funds are short, just pay the bare minimum. If that means borrowing $20 from mom to cover it, swallow your pride and do it. Your credit will reward you later.

# 3 – Late Payments

Sometimes this is a product of neglect and sometimes of necessity. In either case, it affects your credit when it happens – even if you always make your payment. Late payments are technically listed under most credit cards default terms and conditions, which means they have the right to jack your rate up. In most cases, the default rate is nearly 30%. It is important to mark the date and make the payment by the due date. However, late payments don’t just apply to that one card. If the credit issuer has a universal clause in their contract, if you’re late on any of your other bills, they can increase your rate as well – even if you paid them on time.

My advice: Find a method that works to pay all of your bills on time. What’s worked for me is a wall calendar with bills due in red AND I put the dates in my cell phone a week before they’re due. I get reminders from my phone when I need to make a payment.

# 4 – No Budget

Not having a budget is usually indicative of not knowing that they need one. Many parents don’t go over this stuff with their kids before they leave for school and we know the education system isn’t providing the information, so students are left to fend for themselves in this regard. So, students need to take it upon themselves to establish a budget. There are online tutorials and worksheets to help with in the planning phase. Students in college have the best opportunity to establish an excellent credit history, but on the flip side, they can destroy it as well.

My advice: If you’re not sure where to begin with a budget, go to your bank and speak to a banker. They can walk you through what needs to be included and how to plan for each month. Banks are a great source of information that people often overlook. Once a budget has been established, stick to it!

# 5 – Ignoring Creditors

A lot of people, not just students, think that ignoring a debt collector will make it all go away, but the truth is that you’re really doing yourself a disservice. If you know that a payment will be late, by contacting the lender before hand you may be able to renegotiate the due date, skip a payment without penalty to you, or have a fee waived as a courtesy. But, not telling them and then avoiding their calls sends red flags up for them. Most lenders would also rather receive some money rather than nothing at all, so be sure to let them know that you’d like to pay them, but you only have a certain amount to work with. You may get a few people who are snippy about it, but as a general rule, when you take the initiative to talk to them, an arrangement can be made.

My advice: Call your creditors, don’t hide.

# 6 – Cosigning for others

We’ve talked about this here before and the general consensus was that this was not a good thing to do. But, college kids don’t know any better. In some cases, I don’t even think they realize the implications that such a decision will have on them later in life if things go badly. So, it’s important that parents tell them, if nothing else, that cosigning for friends is never a good idea.

My advice: Just say no. Let your friends get their family to help them. If your friend’s parents have said no, there’s probably a very good reason and you should consider that.

# 7 – Not checking the credit report

Again, this is something that many people are guilty of, not just college students. But, I know I didn’t even think to check mine when I was in school. To be honest, I didn’t know there was such a thing as credit reports, let alone that such a thing could be viewed. So, it came as a nasty surprise when I discovered their existence and that mine was the equivalent of ruined reputation in 17^th century England. It really is important that parents pass on a little bit of financial education to their kids, otherwise things are going to get out of hand fast. Teach them how they can pull their credit reports and how to read them. If you’re not sure, take them to the bank and ask for help. These behaviors will do well later in life.

My advice: Look at the credit reports. You get one from each credit bureau for free every year. Since there three credit bureaus, pull a report once every four months and this will give you the most accurate information each time you look.

What other ways can college students ruin their credit…and in some cases, yours?