College Connect: From piggy banks to building personal credit

Posted By David Wilhite

By Devon Tucker

An exciting, but uneasy part of moving into adulthood is the need to become financially independent.  No more allowance or piggy banks.

The real world requires one to establish credit, but college students are far more likely to carry only a debit card rather than a credit card, explained Brenda Cude, a consumer economics professor at the University of Georgia.

She said students overall simply are not interested in credit cards for a number of reasons such as an attitude that credit cards are bad or feeling they do not  have an adequate source of income to qualify.

“But it is the same idea as, how do you get a job if you have never had a job? What kind of experience would count? And in the credit world there is not much else that counts,” Cude said.

Whether it is a stigma towards credit card companies or the idea that they are unattainable, students typically see credit cards as an additional challenge.

“Credit cards are not an easy thing to get,” said Richard Begando, a senior operations management major.  “Even after you get one, there are a lot of limits even if you are using it to purchase necessities. The system is not easy for students.”

Nevertheless, developing a credit history is a crucial step for college students despite many misconceptions.  Are you thinking about your first post-graduation apartment or applying for a job? Both landlords and employers will likely look at your credit report to decide whether to take you as a tenant or to hire you. Establishing credit during college will give you a jumpstart in postgraduate life and can be started through several easy methods.

 Become an Authorized User on Your Parent’s Credit Card

Legally, if you are under the age of 21 or do not have an income, you cannot have a credit card. This roadblock is a common issue that many students face when establishing credit. But parents do have the option to add you as an authorized user on their card. Cude recommended this as an easy way to start constructing a credit history on your credit report.  As an authorized user, you are not held accountable for the payments, but you have the same buying power.

Have Your Parents Co-Sign

If you have proof of full time income, you can have a credit card of your own. But if you do not meet that criteria and are still under the age of 21, you legally cannot obtain one. However, there is the option to have a parent co-sign for you to have a card of your own. By having a parent co-sign, your credit history can be established and you make payments as the account holder.

Apply for a Credit Building Loan or Get a Secure Credit Card

A credit building loan and a secure credit card are two ideal forms of credit. With a credit building loan you “Just go in and say I want a small loan and the reason I want this loan is so I can begin to establish a credit history,” explained Cude. This option to establish a credit history will show up on your record that you make the payments on time. If you are worried about developing debt, a secure credit card is a good option. With a secure credit card you can go to the bank and make a deposit. Once your deposit is in the bank you are given a card tied to that amount as collateral. If you don’t pay the card back, the bank will apply your deposit to the card balance. A secure card can be a safe choice for those worried about going into debt, Cude said.

How Many Cards?

Cude recommended that everyone should have at least two.  “Credit cards break, they are not always accepted everywhere and as reverse as it sounds, more credit cards actually improve your credit score if you manage them correctly,” she said. “Contrary to what might seem like common sense, more credit cards don’t make you less responsible. In the credit reporting world, the person with more credit cards who can manage well is seen as more responsible than the person with fewer.”

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