It’s no secret that finances are an under taught subject in schools and this fact is never so clear as when you’re fresh out of college. Bright eyed and bushy tailed with a diploma in hand, new graduates around the country are prepared to take on a whole lot of things, just not their credit scores. Many have no idea what their credit score is, how it affects them and how they can manipulate it correctly. In fact, most people tend to run into issues with their credit before they learn what they need to know about credit.
Today’s post is dedicated to all 2016 graduates.
Before you begin the next phase of life, this is what you need to know about credit.
Why Credit Is Important
Credit is important for many reasons but mainly because it’s what will determine your ability to make large purchases in the future, what your interest rates will look like, how much you pay for insurance and more. Your credit score affects a lot more things than you may realize. Companies look at your credit to determine how much of a risk they can take on you. Keeping a good credit score is like keeping a clean appearance.
It shows you care and that you’re responsible.
For grads in particular, credit is a really important subject to learn about. According to a recent survey by Experian of this year’s college grads, 69% of them will be graduating with student loan debt and 71% of them have not learned about any type of credit or debt management. It’s truly appalling that even though most students have hefty loans to deal with, they still don’t know much (if anything) about credit. How they handle these loans will have a big effect on their credit but they don’t necessarily figure this out until it’s too late.
It’s time to change that.
What You Need to Know About Credit
There’s a lot to learn and know about credit but there are a few basic things that are really important to understand and implement as early on as possible. Here are a few great tips on credit scores and how they work:
- A good credit score is above 700. Most credit scores tend to fall between 600 and 760. Aim for 720 or above and you shouldn’t have to worry about being denied.
- There are multiple credit scores depending on the credit bureau who is tracking it. You can have a different score depending on which bureau the lender uses. All of them measure the same stuff so the important thing is to make sure to track things on your end and keep a good reputation and that will ultimately be reflected in your scores.
- The main things that you need to pay attention to that affect your credit score are your public records, your debt, the number of late payments you have (and the severity of them) as well as the type, number and age of your accounts. Keeping track of these things and staying on good standing with them is key to having a great credit score. Also, be aware that simply checking or having someone check your credit score affects your credit score.
- If you get denied something due to your credit score, you have options. First, you can get a free credit report from whoever denied you by contacting the lender and asking for the creditor’s information who denied you. Second, you can dispute the report for inaccuracy. If you see something that is incorrect on this report, you can dispute it quickly and get things straightened out easily.
- Building credit can be helpful. You may have heard about building credit but not know exactly what it means or why people do it. This is great for younger people that have no credit history or for people who want to improve their poor credit history. If you have good credit, it’s not necessary. You simply want to use a loan or credit card mainly for the purpose of making payments on time. You can use it for anything, just make sure you have the money ready to pay on time every time and it will be a great tool to build up a solid credit history.
Where to Start
It’s great to start learning what you need to know about credit and how it works, but it can definitely be a bit confusing and overwhelming.
Knowing where to start to obtain a better credit score or debt management plan can be key to a successful and stress-free post grad experience. Here’s where you start:
- Get your credit score. If you don’t know it or haven’t seen it for a while, get it now. It’s hard to fix something you aren’t even aware of. MyFico.com is the official website to obtain your FICO score.
- Get your debt status. Find out what you owe, who you owe and all of the general information that comes with those debts such as interest rates and payment schedules.
- Determine what resources you have available through your school. Yes, we just called out schools for not preparing students well enough for the crushing debt they’re graduating with, but part of the problem is spreading the knowledge. Many universities and colleges do actually have programs to help grads and undergrads alike deal with their loans and finances. Seek out these programs and see what they can do for you. If they aren’t helpful (or don’t exist), make sure to leave feedback or suggest they start helping students with this. You’d be surprised at how much schools are willing to listen to feedback and you could be helping students who come after you.
- Get professional feedback. Especially when you’re starting off and if you have a considerable amount of debt, it’s worth it to bring in an expert. Once you have all the information on your credit and debts, this person will help you evaluate your situation and make a game plan. They can also help you renegotiate interest and payment plans to make sure you’re getting a good deal and improving your credit.
- Get a tracker. There are ways, such as the Experian credit tracker, to track your credit and keep you in the loop so there are no surprises when it comes time for a big purchase or loan. Make sure your finger is always on the pulse and everything is going smoothly since credit scores can change relatively quickly.
- Be timely. One of the biggest things that affects your credit score is timeliness of your payments. Pay close attention to what your financial situation looks like and make sure that you can make all payments on time. This will reflect well on your credit score and will generally get you in a better place financially.
Whether you’re a new grad an undergrad or well post grad, understanding what you need to know about credit is very important. Taking time now to learn what you can do to improve it will definitely aid you in responsibly planning your finances and getting on track for the future. Get started now by getting your score and making a plan!
Get in on the June 30th $100 Giveaway through Experian! If you’re about to graduate or a recent graduate, show your pride in your accomplishments on Twitter, Facebook and Instagram. All you have to do is post a photo of you wearing a cap and gown and include a written description (200 words or less) of the skills you gained to earn that degree and hashtag #credit2grads. For more information, see http://bit.ly/23Vlnkg for the Official Rules.