You might think that college is a time when you run up debts paying for living costs and partying. This doesn’t matter as you will soon have a decent job and you will be able to pay all the money back, right? Hopefully, this will be the case; however, many graduates still find it a struggle to get jobs straight out of college. This is especially true in a depressed market or if the industry you want to work in is particularly competitive.
Building up a good credit score is possible while you are still in college, and this means that you will find it easier to get credit and enjoy favorable rates when you need them. This will come in useful after graduation when you want to buy a car to commute to your dream job or you decide to buy your own home.
Check Your Credit Score
If you are concerned about your credit score, then check it. This way you would have confronted your demons and you can see what you are working with. Also, consult insolvency practitioners if you’re worried about getting into debt. There is a lot of talk about a fair credit score being an important thing to aim for. This is the point at which lenders will start to consider lending to you and your credit will be reasonable, but what is a fair credit score? This is usually seen as being in the region of 580 – 669 so this is the point you should aim for. If it is higher than this, great. If not, you may need to improve it. Tally is a great company to use if you want to increase your credit score as they offer to consolidate your existing cards and give you one single monthly payment. This means that you won’t be paying lots of different interest rates and will be out of debt quicker as well as making it easier to manage your payments. Check out their blog outlining what a fair credit score is and how to improve yours.
The Bank of Mom and Dad
If you are lucky enough to be able to rely on the bank of mom and dad for all your undergraduate expenses, you may think that this will give you a good credit score. After all, you aren’t officially borrowing any money so there shouldn’t be a problem. However, that is not quite how credit scores work.
Credit scores rely on being able to get an idea of how you have dealt with credit in the past. If you have kept up to date with your payments, you will be given a good credit score and if you have a lot of missed payments on your file, you will have a poor credit score. However, if you have not had credit in the past, there is nothing on your credit file to assess you against. This means that any financial institution that lends money to you is taking a high risk as they are unable to tell how likely you are to make repayments on time. For this reason, having no credit can mean that you have a low credit score.
To improve your credit score if you don’t need to borrow money, there are a couple of things you could do. Firstly, apply to take out a credit card. You do not have to let debt mount up on this as you can pay it back at the end of each month. However, it will leave a mark on your credit file and prove how well you can manage debt.
Another option is to take out a cell phone contract. You have to repay this bill every month and it will show up on your credit file and can be used to assess your credit score. Showing regular monthly payments will improve your score.
Pay Your Bills on Time
Whether you pay your bills on time or make late payments will show up on your credit file and late payments can harm your credit score. If you have a lot of different credit cards and lines of credit, then you might find it really difficult to stay on top of all the payments. The best way to get organized is to set up direct debits so that your bills go out automatically. This way you can’t forget about them. You just need to make sure that you have enough money in your bank account to cover the payments.
Avoid Changing Addresses Often
This can be a tricky thing to manage while you are studying but the longer you stay at the same address the more reliable and creditworthy you appear. You are less likely to change addresses to avoid making payments and if you stay in the same place, you won’t be hard to find. This means that you are more creditworthy and considered less of a risk which means that your credit score increases.
Avoid Making Too Many Applications
A loan or credit application will stay on your credit file for six months even if you don’t take out any finance. If you don’t take out the finance, this could raise questions as it may look as if you have been turned down by several finance companies and are therefore a high risk. This issue is compounded if you apply for a lot of credit over a short space of time and it could affect you getting any credit at all.
It is fine to shop around for the best rates as long as you don’t keep submitting applications for the rates you find. Use a comparison website to help you avoid the problem and only submit your application for credit once you have found the deal you want.
Check for Errors
Mistakes do happen so make sure you check your credit file for errors every so often using a company such as Experian. If you see something that doesn’t look right, then report it and apply to have the incorrect information taken off your credit file. This can make an enormous difference to your credit score.
Check for Fraudulent Activity
Fraudulent activity can cost individuals thousands of dollars every year, but did you know it can also affect your credit score for years, especially if you do not notice or report it straight away? A fraudster will use your personal details to take out several lines of credit and never pay any of them back. This leaves the victim with a credit file that says that they have lots of outstanding debt and missed payments. Their credit score can be obliterated with a few clicks of a mouse.
If your credit score is severely low, then ignoring it is going to make it worse. If you owe money to finance or utility companies, get in contact with them and try to negotiate an affordable payment. Tackling money issues may mean that they won’t affect your credit score and you can resolve them quietly. It may be tempting to stick your head in the sand when the bills come rolling in, but this is the worst thing you can do.
Follow these guidelines and you should be able to graduate from college with manageable debts and a good credit score. That way you are ready to hit the ground running in the post-graduate world.