For incoming freshmen college often means one thing: freedom. That freedom can come in the form of no curfew, no set study time, or no one looking over your shoulder as you spend money. Such freedoms can be part of a positive growth experience, or create negative situations which take years to recover from.
Last year more than 60,000 young adults under the age of 24 came to an NFCC Member Agency for assistance. Many were forced to postpone major life events such as getting married, buying a car, or even renting an apartment due to an already tarnished credit history. This is regrettable, but not surprising, as many students leave home having had little or no formal training in personal finance.
While college is full of exciting and new adventures, the NFCC reminds college freshmen that these years are critical to a person’s financial future, and offers the following basic tips to stay on the financial honor role:
- Be financially organized. Always be aware of how much money is in your checking account. This involves writing down all transactions, purchases, deposits, and ATM withdrawals, as they occur. Many well-meaning people have overdrawn a checking account due to simply neglecting to record an entry.
- Use prepaid cards or a debit card to avoid overspending. This is an effective way to control spending, as when the money is gone, the spending has to stop. These types of cards can be a good introduction to managing money for those who have had no prior financial experience. Research the cards in advance to confirm if any fees are involved, thus avoiding financial surprises.
- Be aware of the risks of identity theft. Recognize that identity theft is a serious issue, and can take dozens of hours to resolve, time that should be spent at class or studying. Never let someone else borrow your debit card, and never reveal your PIN number. Do not leave receipts lying around for others to see. Password protect personal information on computers and smartphones.
- Establish and maintain good credit. If you have a credit card, understand that how you handle credit today will affect your future in multiple ways. Banks, prospective employers, credit card issuers, utility companies, and property management companies may pull credit reports when you apply for a credit card or loan, apply for a job, purchase a home or a car, rent an apartment, or sign up for utilities. Paying bills on time and keeping a low balance-to-credit ratio are key elements to establishing good credit, while handling credit irresponsibly can put you in financial distress before your professional career has even begun.
- Know what’s on your credit report. Consumers are entitled to a free copy of their credit report every 12 months. Get into the habit of checking your report at least once each year. The report can be ordered online at www.annualcreditreport.com or by calling 877-322-8228.
- Know your credit score. As you build credit you will also begin creating a credit score. A credit score is a predictor of risk used by lenders when deciding whether or not to extend credit and at what rate. A high score usually equals a low interest rate. There must be an adequate amount of information in the credit file for a score to be created. Generally, three open and active lines of credit are needed for a score to be calculated. There may be a small charge for the credit score which can be obtained from a credit reporting agency or from FICO.
To prevent a financial crisis, or to find a way out of an existing difficult personal financial situation, affordable and reliable help is only a phone call away. To schedule a confidential appointment, and be automatically connected to the NFCC Member Agency closest to you, call 800-388-2227, or en Espanol 80o-682-9832. For assistance online, go to www.DebtAdvice.org.
Gail Cunningham is Vice President of Membership & Public Relations with the NFCC.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.