Financial Freedom 101

Not establishing credit as a college student will hurt you in the long run. I applied for my first credit card the summer going into my freshman year of college. I received a $300 limit to build my credit, within one year, my credit score went from 650 to 719. As a commuter, the way I built my credit was by only using my card for certain things, such as gas and food. This was to ensure that I wouldn’t overspend and get myself into credit card debt.

Credit history is more than just being able to use credit to purchase things. Many students going into college don’t understand how the financial decisions they make today will affect them down the road. Sadly, high school doesn’t teach the basics of managing your finances and building your credit; instead, high schools make students sit through math classes learning stuff that they may never use in the real world. If you build your credit throughout college, it will give you a massive advantage over your peers once you graduate.

So why is a credit score important? A perfect example is buying your first home. When looking to buy a home, the first thing the mortgage company will do is check your credit score. If it is low, then the loan you want for that house will be significantly less, and you will have to pay more each month on your mortgage. If your credit score was high, the company would provide a larger loan, reducing your monthly mortgage. 

An overlooked factor credit scores can affect is employment. When looking for a job, your employer may ask to see your credit report. Employers do this because having a good credit score signifies trustworthiness; lousy credit scores tend to reflect the opposite. According to some reports, nearly half of all employers run credit checks on prospective employees. So if your credit is weak, it gives the employers more of a reason NOT to hire you.

Another reason to build your credit while you’re young is that it can reduce insurance for your car, health, or home. With a bad credit score, you will have to pay higher insurance premiums,  a bad credit score reflects on your ability to not pay your bills on time. Overall, building your credit young has nothing but a positive impact on your financial life. Stay disciplined and don’t overspend, keeping your credit card out of debt will help you on your path to Financial Freedom.