With economic times as tough as they are, the last thing you want is bad credit – especially as a student. In order to graduate debt free or at least with manageable loans, it is essential to establish good credit from day one.
I know first-hand the negative effects of having bad credit. During my college years I found myself in some financial trouble. Lured by unscrupulous credit card companies, I took out multiple cards to cover tuition and living costs. Even with my Post 9/11 GI Bill benefits helping cover the cost of my tuition, at one point I got so far behind on bills that I considered borrowing money from my folks, taking out a car title loan, and even dropping out of school all together.
Fortunately, I was able to get out of overwhelming debt by making changes to my lifestyle. I was lucky enough to realize the problem and put changes in place to avoid becoming mired in overwhelming debt, but not everyone has the same opportunities. Before you find yourself facing similar problems, make sure to read a little further to see if you’re making some of the same bad decisions that I was!
Here are my top 5 tips for avoiding bad credit:
1. Avoid Taking Out Too Many Cards
I know from experience how alluring it is to take out as many credit cards as possible. Student living can be pretty expensive and having easy access to credit is a convenient appeal. But in the long run, you and your credit score will suffer if you aren’t extremely careful.
It can become very difficult to juggle payments on more than one card and the more cards you have, the more likely you are to overspend. Try keeping only a single card even though it may seem tough, because in the long run it will help you avoid serious economic repercussions.
2. Create A Budget
Each month, create a budget for all of your living and educational needs. This is a simple suggestion, but planning your expenditures can help you create a more realistic picture of how much you should put on your credit card each month. It can also prevent you from overspending and help you to recognize and cut out unnecessary costs.
3. Contact Your Creditors or Loaners
If you are in a really bad situation and can’t cover your minimum credit card or loan payments – directly contact your creditors or loan company. Explain your economic position and estimate when you will be able to start making payments again.
Some companies will offer to put your payments or loans temporarily on hold, allowing you to have some breather time to start saving some money for repayments. Or, alternatively, they may help you form a repayment plan which can help you repay your debts in easier installments.
4. Try Not To Max Out Your Card
Although it is very tempting to max out your card, the consequences can be very unpleasant. If you can’t pay off immediate payments, your card will likely be cancelled – which is never good for your credit score. Unless you are absolutely certain you can pay off your maxed card within the next month – avoid maxing out your card at all costs.
5 Never Ignore Your Statements
I know how overwhelming credit card statements can be. It is very easy to simply put them in a drawer and ignore them for a couple of months. However, this will only lead to higher interest and ultimately much more debt. Even if you can only make the minimum payment that month, aim to pay that off and you will be thankful in the long run.
In today’s society, there are few students who don’t have to rely on credit cards to get them through the day, but it’s important to use them wisely. Avoid racking up huge debts and permanently damaging your credit score by following these five simple tips.