By SYDNEY MILLER
It is supposed to be easy. Credit card companies practically beg students with youthful naïveté and lackluster self-control to open an account. I receive at least four credit offers in the mail each year; an everlasting irony, considering I am rejected by the same companies every time.
The first life advice I’d lend to any student new to the world of personal finance is, don’t waste your time. Run a credit check before you apply for credit cards (which you can do for free once a year with Experian, Equifax and TransUnion). I ran a credit check on myself and saw the itty bitty black mark on my record that scared away lenders — a lapsed bill payment that I wasn’t even aware was my responsibility. Yes, I know technically you become an adult at 18, but I missed that memo. And the collections agencies don’t care if you “feel” like an adult.
I had bad credit before I even knew I had credit.
There are always other ways to build credit and show your ability to pay the bills on time, even if you don’t have a chunk of magic plastic in your hand. Do you pay rent on an apartment? If you pay your rent on time, you are building credit, even if your parents are really the ones footing the bill. Same goes for utilities. Electric, phone, gas and cable bills are the debts most often reported to credit bureaus.
But if you’re itching to get a credit card in your hands now, you have two options: a secured credit card and a co-signer. Secured credit cards are “secure” because you’re the one fronting the cash as a security to the lender. It’s basically a security deposit on your credit, so that if you don’t make payments, your lender isn’t in the hole. The downsides to secured credit cards are that you can only charge up to the amount of the deposit (if you put $500 in the account, you can charge up to $500), you have to have a lump sum to put down as a deposit, and there are occasionally charges, such as annual fees, that can sneak up on you if you don’t shop around.
Or, if your parents have a better financial history than you do, they can become a co-signer on a credit card. Becoming a co-signer for someone’s credit requires a level of trust and dedication that can usually only come from your mother, because they basically acquire your debt if you fail to make payments. It also allows you to “inherit” the co-signer’s credit score.
So if you have no credit, or bad credit, the outlook is not all doom and gloom. Run a credit check, pay your bills on time, and suck up to Mom—and, as Suze Orman says, start building your credit early!
–Sydney Miller is a senior journalism student at the University of Missouri
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