By Hallie Smith
Having a good credit score is critical to owning a home, signing a lease and other financial responsibilities of adulthood. However, many college students do not understand how to build credit in a healthy way.
Brenda Cude, a professor of financial planning, housing and consumer economics at the University of Georgia, said college students “are way too concerned and too conservative about taking risks.” She said this is especially true when it comes to credit cards.
Cude attributed some students’ hesitance about credit cards to their experiences watching parents deal with credit card debt. She said students are more likely to use debit cards because they don’t equate them with taking on debt.
Arianna Jain, an economics and international business major at UGA, said, a lot of students learn their approach to credit cards from their parents, but the advice is not always in the students’ best interest.
“I feel like a lot of people only learn about credit cards from their parents, and a lot of parents tell their kids that credit cards are irresponsible,” Jain said, adding that parents fear their student will run up too much debt when they should be teaching their student to use credit responsibly.
“I don’t think they realize that it puts their kids at a disadvantage when they are trying to take on adult financial responsibilities,” Jain said.
The idea that credit cards users can act irresponsibly is not wholly wrong. According to Cude, using and paying for a credit card is a commitment that should not be taken lightly. She added, however, that college is a good time for making mistakes with money as these mistakes may be of a smaller scale, and parents can serve as backup if needed.
Cude said using credit cards can help build discipline and assist in making healthy decisions, including developing the habit of saving money for emergencies and other longer term expenses.
“I think building that habit and learning to not spend every dollar that comes through your hands is a good investment in your future,” she said.
Forming good habits, no matter how insignificant is integral to building and keeping a good credit score, she said. Dropping coins in a jar, moving money across accounts and paying debt as it is incurred are simple measures that show progress and commitment and ultimately build credit.
Cude said college students should begin with a debit card and begin building good habits by staying within the limits of available funds. Once comfortable with this commitment, she suggested moving on to an authorized user credit card, in which parents are legally responsible for making the payments. This step can be followed by getting a regular credit card, which means the student would bear the sole responsibility of paying the card as the primary account owner.
Cude recommended that students, “Try more things, but also talk to their parents about what they are doing so their parents can help them out even just for advice.”
Hallie Smith is a student at the University of Georgia.