College Connect: Many students have debt; few understand their credit score

Posted By Crystal Beasley

By Harrison Young

In the age of rising costs of attendance and omnipresent student loan debt, few students graduate from college without developing their credit.

But more often than not those students have little or no idea of how to properly manage credit, and misinformation leads many to unneeded worry and unwanted frustration.

Callie Hagerman, a sophomore from Alexandria, Virginia, came to the University of Georgia with dreams of being a vet. She also got an education in how important credit, and especially good credit, can be when she decided to move off campus with some friends.

“When we were looking for houses to rent for the next year, I didn’t need a credit score at the time, but I saw it kept popping up,” said Hagerman, “It seemed like I should have a credit score.”

She applied for a credit card and started building credit one month at a time. She kept track of her credit score along the way with one of the free apps that became popular in recent years.

“I just kind of kept my eye on it, but it hasn’t exactly been what I expected, I never go over the limit or get super close to it,” Hagerman said, “Each time I see the bill I pay it in full, so I was kind of confused why my credit score was gradually going down.”

Brenda Cude, a professor of financial planning, housing and consumer economics at the University of Georgia, said this sort of confusion is common, especially among college students.

Even responsible behaviors, she said, can lead to a falling score, and if consumers aren’t familiar with how the score is calculated, it can be difficult to improve.

“Paying on time is very important, about 35 percent of your credit score is paying on time, so that’s a very important thing to do,” Cude said, “but if she’s charging more than 30 percent of her credit limit, that actually will lower her credit score.”

Cude also noted that it is important to pay on time, not necessarily that the balance is paid in full.  Paying on time is incredibly important, and small mistakes can hit hard. Cude said, for example, “if you’re two days late, the credit card company can say you’re 30 days late.”

The other key factors tend to present more of a challenge for college students, like the age of their credit history, what types of credit they’ve had, and what new credit is sought.

“These other three pieces are a lot smaller, and in general they don’t help college students, but they don’t count so much,” said Cude.

The key here is the longer and more diverse a credit history is, the better it looks. But together they amount to roughly the same as one of first two factors, so they aren’t necessarily as important, Cude explained.

Another issue for today’s students is that even as the number of students with loans goes up, the number of students with credit cards goes down. Cude conducted a survey of freshman on UGA’s campus which found that two-thirds of them only have a debit card.

“The ideal credit score is in the 800s, but I think that’s hard for most college students,” said Cude. “I see lots of college students with credit scores in the 700 range. They have very limited experience with credit.”

Still, she also reiterated that students shouldn’t overextend themselves. “Always pay on time, and always pay as much as you can, at least the minimum,” she said.

Harrison Young is a student at the Grady College of Journalism and Mass Communication at the University of Georgia

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