College graduation is an exciting time for most students but can also be a source of stress…student loans, job interviews, and financial responsibility. While many students find themselves learning how to be financially responsible during their college years, there are many students who don’t learn how to manage their finances until they are out on their own. Your credit report and credit score are just the next grading system used to evaluate you in the financial world. By following these simple steps, recent graduates can assure fiscal responsibility and a positive credit score.
First, as a college graduate you must be eager to open a credit card on your own without the assistance of a parent or co-signer. While having your own credit card will help your report, keep the credit card applications to a minimum. Every time you apply for a card, the credit card company will access your credit file and make what is called a “hard inquiry”, which will count against your credit score. Applying for one or two credit cards is reasonable, but beyond that you could be doing damage to your report at this early stage in your newly independent life.
Second, make all of your credit card payments in a timely manner. Payment history accounts for the largest portion of your credit score. While college graduates may be busy celebrating one of the most exciting times, don’t forget about your responsibility and forget to make all of your payments. Keep in mind that a one time 30 day late notation won’t destroy your score but multiple late payments will haunt you for 7 years from the date the payment was first missed. A positive payment history will allow you more opportunity and lower interest rates so try your best to keep on top of all bills.
Next, make sure you begin to build a credit history. While using credit can be scary, without using some credit you can’t build your credit standing for when it really counts. If your credit report does not reflect any credit cards or loans, your report will reflect a poor credit history. No credit is the same as bad credit. Using credit wisely is a good way to build your score. Start with a credit card with a low balance or a secured card to begin building your history.
Make sure to review your credit report. Under the Fair Credit Reporting Act (“FCRA”), you are entitled to one free copy of your credit report from each of the three credit reporting agencies annually at AnnualCreditReport.com. Checking your report to see what is reporting is a necessity for graduates looking to build their credit responsibly and positively. If you don’t know what is reporting on your credit report you can’t manage it.
If you are in need of advice or assistance with your credit, contact SmithMarco P.C. for a completely free case review.