Happy Financial Friday!
First of all I would like to apologize for the random times I have been posting this week. I have been NON STOP with work things: It’s finals week for my students and trying to cram in last minute things, blogging, running, and spending time with my husband is really stretching me pretty thin.
Today’s topic for Financial Friday is maintaining Good Credit. This is a very large part of my course: It is critical that students learn early on how to have, and maintain a good credit score. Growing up is exciting for a high school kid, but too often they can fall into a financial pitfall and become overloaded with debt. Good credit opens doors in a similar way that good grades would do so for a high school senior: It gives you more opportunities, Better school options & better start to your future=higher paying future jobs. Good credit=Lower loan interest rates & faster approvals=Paying less for the things you want.
1. Open a savings and a checking account. This may not sound like a piece of maintaining good credit, but in today’s digitally automated world, it is very difficult to pay credit card bills when you don’t have a bank account and a debit card. Make regular deposits into a savings-by paying yourself first, this gets you in the habit of making regular payments. Remember : keeping your checking account in the positive helps you to build a good relationship with your financial institution. When lending to their own customer’s, loan officers will take a peek back at the customer’s history.
2.Start Young. To start off at early age building credit, I often suggest opening up a small credit card at a local credit union or bank. A student can get a $500 credit card to help them build their credit up. I often suggest using the card for small and occasional purchases, and putting the money aside for when their bill is due. This gets them in the habit of paying the line back right away. A low credit line of $500.00 establishes credit with a low risk of getting “out of control” with the card. Later-when applying for student loans-that kid will have lower interest rates because he/she has already gotten their feet wet in the credit world and displayed great borrowing habits.
3. Paying Debt Back. To have good credit means to have a record of having borrowed money and paid back your debt in a timely fashion. This is the single biggest way to have good credit. Pay MORE than the minimum balance each month. When you use your credit card to charge something and pay it off over a long period of time, remember that these items will end up costing you more than it would if you had bought the items with cash.
Example: If you making only the minimum payment of $25.00 on a credit that is at $1050.00 at an APR of 25.99%, it would take you 7 years to pay back and you will end up spending a whopping $2117.00
BUT-Same card & making a payment of $42(less than $20 more than the minimum payment) and you will pay it pack in only 2 years and spend a total of $1521.
4.Pay it ON TIME. Remember, late fees often will cost you as much as your minimum payment will. Late payments wreck your credit score so be mindful of when they are due. You can go right on the websites of most creditors and pay them online with your credit card. Or utilize your mobile banking. Mailing out checks for payments is a things of the past. It’s so easy to use automated services there really is NO excuse to be late on payments anymore.
5. Don’t just pay your credit obligations on time. Pay ALL your bills on time :electric, gas, water, etc. Utilities can also affect your credit score. Paying all bills consistently is essential to keeping your credit score high. This includes rent from a landlord, library fees, traffic tickets…EVERYTHING.
6. Pay off the Balance, in full, monthly. This obviously is not an easy thing to do-but you don’t want to get yourself into a situation where you are constantly charging everything in your life. Try to use the card and set the money aside, or make the payments right away (this is what I do transfers onto my card as soon as you use it)
7. Remember that not all cards are created equal Be choosy with your cards. Pick ones with LOW interest rates instead of cards with the bells and whistles of rewards and points.
8. Don’t apply for too much all at once Red flags go off in a loan officer’s head when they see you have applied for multiple lines of credit at the same time. Of course, there are always emergencies, but if you’ve built up good credit and are stuck in a bad situation, the good credit you’ve built up will help you obtain a fast fix.
9. Leave your paid off credit cards open. Lenders like to see that you can maintain a zero balance credit card(s).
10. Check your credit once a year. You are entitled to one free credit report each year. Experts recommend you check your score annually. There are three major credit bureaus :Experian, Equifax, and Transunion. You can obtain a credit report through one of them, or by going to http://www.annualcreditreport.com. Guess what website is NOT free??? http://www.freecreditreport.com, http://www.freecreditscore.com or any of the other gimmicky-get-that-stupid-jingle-out-of-my-dam-head websites. They will charge you a fee. If you are entering in your debit card info :IT IS NOT FREE!!!!! Checking your credit score lets you know exactly what you owe on various debts& ensures you haven’t been a victim of fraud/identity theft. I recommend you do this. Also: remember that you have the right to dispute any fraudulent charges on your credit!
Happy Financial Friday everyone! I hope these tips help you out, feel free to ask any questions!
How do you maintain good credit?