Are you a new college student curious about establishing your credit or an existing college student that wants to avoid mistakes that will impact you for years? If so, check out these 5 credit killers for college students.
1. Too many credit cards – When I was a college student in the early 1990s, my university’s main campus walkway was lined with banks offering free t-shirts to anyone that filled out a credit card application. Inevitably, every table would have a line of students ready to sign on the dotted line. Today, there is legislation in place that controls the marketing of credit cards to college students, but this doesn’t mean that college students can’t get a credit card. If you decide that now is the time to open up your first credit card, don’t get excited and open up as many as you can. Get one and use it responsibly. If you have too many open lines of credit, your credit score will suffer.
2. Maxing out credit cards – You have your first credit card, now what? Don’t max it out. A credit card balance that is too close to the line of credit will negatively impact your credit score. There are various schools of thought as to the best balance to line of credit ratio and no one really knows the sweet spot. In my opinion, I’d ignore the possible positive benefits of maintaining a balance and just plan on paying off your credit card balance in full every month.
3. Paying bills late – Obviously, paying bills late will have a negative impact on your credit, but usually not until a payment is 30 days or more late. The grace period doesn’t extend your due date, though. Don’t get in the habit of taking advantage of this grace period, because you’re just setting yourself up for trouble in the future. Bills have a due date for a reason, pay them on time and you’ll avoid credit dings as well as late fees.
4. Excessive student loan debt – Americans are holding about $1 trillion in student loan debt. Yes, college is expensive but don’t think your can borrow your way to a degree. While loans may help you walk across the stage to accept your degree in four years, you could be setting yourself up for a decade or more of tight budgets, or worse. If you have to apply for a student loan, only accept the bare minimum. Financial aid awards often come with more money than you need to cover tuition and books and some college students don’t realize that they can choose to accept a lower amount.
5. Paying rent and utilities late – You’re living on your own for the first time and with that comes the added responsibility of paying for your own rent and utilities. Make sure these bills all get paid on time. If you make a habit of paying your rent late, you’ll find it difficult to rent another place in the future. You also need to pay your utilities on time. Paying your utility bills late will not only negatively impact your credit, you could also end up needing a more substantial security deposit in the future.