Why you should start building your credit in college

By Charlotte Norsworthy, University of Georgia

Friends of Alexis Manson call her the “budget queen” because of her categorized budget spreadsheets and careful spending habits.

“For me, building credit and good practices during college feels lower risk than waiting until after college,” Manson said. “I think it’s better to start learning right now while I have a bit of a safety net than wait and be overwhelmed by new expenses at the same time that I’m beginning to build credit.”

Manson, a senior political science major at the University of Georgia, said she learned the importance of building credit from her parents. She said they encouraged her to get a credit card, and she did in August 2018.

“I think building credit isn’t just important for being able to take out loans and such in the future, but also for learning how to plan for your expenses,” she said.

Manson said figuring out her financial plan while still in college provides a safety net in case she makes a wrong step.

“I know this isn’t the case for everyone, but if I were to be unable to pay off a credit card bill I know that my parents would help me out at this stage in my life,” Manson said. “After college, when I’m working full time, I’ll have more expenses than I do right now, and I wouldn’t have as much parental support.”

Michael Thomas, a financial planning professor at the College of Family and Consumer Sciences at the University of Georgia, spends most of his semesters teaching college students why it is important to establish and build credit now.

“Your length of credit history is 15 percent of your credit score,” said Thomas. “So just starting as early as you possibly can is better because you’re demonstrating history over time.”

Thomas said credit scores are built out of a few key components including credit history. Other components include credit utilization, types of credit (such as having a credit card and student loans, for example) and the pursuit of new credit, he said.

One of Thomas’ biggest “pet peeves”, he said, is when college students choose to defer financial planning until after they graduate.

“As a college student from semester to semester, that individual should have a financial plan in terms of how they’re trying to position themselves so they can get so that they can optimize the benefits of their college education, post graduation,” he said. “So, I’m a big advocate of planning ahead of the fact.”

Thomas said a caveat to his support for students establishing credit is financial responsibility. He said students should be very self-aware to understand whether or not they are ready for an important financial step.

“The root of the issue is related to their money management ability, and whether or not they’re actually tracking their expenses and actually have a plan for their money,” he said.

Thomas’ two pieces of advice for students struggling to manage their expenses are to keep expenses between 15 to 30 percent of your account limit each month. Second, he said students should set aside the amount of money they want to spend on their credit card at the beginning of the month in order to pay it off by the end of the month.

“Having self-awareness and understanding whether or not you can handle the responsibility of the credit card is just as important to have the credit card self,” he said.

Charlotte Norsworthy is a student at the University of Georgia pursing a master’s degree in journalism.

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