College Student Credit Card Debt - Tips On Avoiding the Pitfalls

Spending money – it feels good. If you are honest with yourself, you will agree with me. There is something about walking into a store and buying what your heart desires. I am not talking about high-end fashion items such as Chanel or Gucci. Even going into Home Depot on a nice day and buying plants and mulch to landscape your garden feels great.

Now imagine being a college student with no job and no credit and being offered a credit card. I was issued a credit card when I was 19. I walked into the university book store to buy my $5.99 used philosophy book and walked out with an MBNA credit card with a $500 limit. It felt pretty good. This has been going on for years. I did not even know what a FICO Score was and yet, I was on my way to building my credit file.

Fortunately, I have always been a spend thrift and as such as I did not run into the nearest Saks Fifth Avenue store and blow my credit on a pair of shoes. Fast forward a few years later and my sister is attending my alma mater. She gets the same credit card and runs to the nearest mall before her signature ink is dry. This woman loves to shop. She lives for it.

It is estimated that 80% of college students have at least one credit card. The average undergraduate student with a credit card has about $2700 in credit expenses. Whether or not this factoid comes as a surprise, it is true that Finance 101 does not teach students about the concept of “Credit” and how it will impact their future lives. Like most people, I did not know what a credit report or FICO score was until I embarked on the home buying journey.

Our credit follows us everywhere we go. When college graduates venture into the corporate world, many will be surprised to know that potential employers make inquiries against job applicant’s credit file during the due diligence process. It is a means of determining whether an employee is so desperate for money that they would harm the company by acting inappropriately.

Whether you have poor credit or need to build credit, here are 5 steps to improve your credit score:

  • Get a unsecured or secured credit card (prepaid credit card) with a limit of $500 to $1000 such as one of these.

  • Do not max out your credit limit when you purchase items. This is a sign that you are spending beyond your means.

  • Pay off your monthly credit balance on time – always!

  • Keep a credit card, if you have a strong credit history with them.

  • Do not open too many lines of credit. This is a red flag that you may be robbing peter to pay paul.

  • Following these 5 steps will ensure an excellent credit status. Learn how your FICO Score is calculated.