How do you build your credit score?

Courtesy of Unsplash

Debt — a scary word and an even scarier reality for many young adults, especially college students, in the cur- rent financial climate.

From student loans to car payments, nearly every college student has been exposed to some type of debt. However, some may not realize how important those payments are when it comes to their credit scores.

Dr. Adele Harrison, professor of finance, said a credit score is one number to which young adults should be paying extra attention.

“It’s a reality of the world we live in because our banks don’t know us per- sonally anymore,” Harrison said. “They have let this algorithmic score that communicates our relationship with debt, how well we have utilized it in the past, be an indicator of our character rather than our actual character.”

Many of the things that students need after college depend on decent credit scores.

Harrison said whether someone is in debt or not, it is best to start building credit now so it is easier to make those major transitions into adult life, such as renting a house or apartment or buying a new car.

Austin Lentz, sophomore accounting major, said in the grand scope of things, credit is a big deal, especially for people who do not know how to use it.

“Owning a credit card takes responsibility and students don’t quite get that yet,” Lentz said.

Lentz got his first debit card when he was 16 years old and said he uses it like a debit card.

“Whenever I use it, I go on the mobile app and immediately transfer money from my checking account to pay it back,” Lentz said. “That way, I avoid making late payments.”

Harrison said someone should never go into debt for something that will not increase in value over time.

“Take student loans, for example,” Harrison said. “You take out student loans because you are enhancing your job potential by enhancing your knowledge.”

Erin Gilmore, sophomore liberal studies major, said she opted out of student loans because she did not want to start her adult life in debt.

“I chose not to take out student loans not because debt is scary, per se,” Gilmore said. “I just don’t want to be overly worried about finances and having to pay off student debt.”

While this approach can be beneficial to beginning post-graduation life, it does not help build credit.

Harrison said the safest way to start building credit is with a secured credit card.

Secured credit cards are based on a cash deposit made when the account is opened. The deposit usually equals the credit limit, so if $200 is deposited, there will be a $200 limit.

“Really you’re going to be borrowing from yourself,” Harrison said. “It’s safe because they can’t raise your limit unless you deposit more into the account. That will help keep you from getting over extended.”

Harrison also said to pay attention to and understand all the terms used in a credit contract.

“Don’t be afraid to ask if you don’t understand something,” Harrison said. “This is the one time where you can’t scroll to the bottom to the page and click ‘I Accept.’ You need to read it all and make sure you understand it before you sign your name because it is a legal contract and it will be enforced.”

The biggest piece of advice Harrison said she could offer to college students about their credit was to limit how much you borrow.

“You’re going to have to give up some future consumption to pay back what you’ve borrowed,” Harrison said. “Even if God might be directing you in your heart’s desires, you may have to go another direction to sustain the payments you have to make on your debt.”

Credit plays a big part in human life but being educated about it and being smart with how it is used makes everything just a little bit easier.

Leave a Reply