Good grades may help you land your dream job after you graduate, but there is something else you’ll be graded on throughout college that may be just as important…
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…how well you use credit. Did you know that many companies now check your credit history when you apply for a job? Landlords also check your credit when applying for a lease. Good credit, you get approved, move in with your roommates, and have a stellar year.
“Bad credit, your roommates get in, and you get stuck living with Pee Wee Herman and Jar Jar Binks on the wrong side of campus”.
After all, why would a landlord think you’d pay rent on time if they know you don’t pay your other bills on time? Having a good credit score can be just as important as getting good grades, sometimes even more important, here’s why…
You’ve probably at least heard of a credit score, a number based on your credit history, or how well you use your credit. Lenders and banks use this number to determine if you are eligible for a loan, how much to loan you, and at what interest rate. Your credit also matters to anyone considering your application for a student loan, a car or house loan, auto insurance, credit cards, utilities, apartment rentals, mobile phones and jobs. Simply put, if you pay your bills on time, your credit score will increase. Pay late and it can decrease. Any late payments you make to credit cards, utilities, hospitals, loans, or landlords can appear on your credit report and lower your score.
Credit cards are among the most convenient ways to establish credit, but credit card bills are different than other bills. If you pay late, even by literally one minute on the day it’s due, you will be charged a late fee averaging $35 a pop and this can actually hurt your chances for obtaining credit later in life. You could spend four years working hard to do well in school, but a missed credit card payment can come back to haunt you and cost you money…a lot of money.
Bad credit can negatively affect your ability to get a loan for a car or a house. That could mean no loan at all, or simply a higher interest rate on that loan. A higher interest rate of just one percent on a mortgage can cost you more than $40,000 during the course of the loan. That’s more than the average American’s yearly salary! On the subject of annual income, think about this: if you had a poor history of paying bills late and missing payments, why shouldn’t you expect a prospective employer to think you could have a problem meeting deadlines at work? If you lose out on a job because of bad credit it can cost you more than $10,000 a year in salary – an awfully high price for that iPod you couldn’t afford or procrastinating on paying your bills during freshman year.
“The day you turn 18 your credit history clock starts ticking and doesn’t stop until, well, you’re lunch for a hungry family of worms… or maybe sleeping with the fishes if your credit score with Guido gets too low”.
Because your credit history begins with a blank slate, decisions you make early on can significantly impact how you receive credit down the road. Let’s say one of the first things that shows up in your credit history is a negative entry, like a missed credit card payment. The next time someone checks your credit that bad mark will really standout because you haven’t yet had a chance to establish a good credit history over time. This can have a cannonball effect because individuals checking your credit in the future can see information concerning credit decisions others have made about you in the past. It’s also important to understand these actions will lower your credit score and your credit score is frequently the only thing companies look at when evaluating you and your credit.
On the flip side, if you use credit wisely it can open a lot of doors and save you a ton of money. Establishing a credit history is easy, but building and maintaining good credit takes responsibility and planning. Educate yourself on how to use credit properly. If you’re serious about doing well in college and getting a good job when you graduate, remember:
Your GPA measures your classroom performance
Your Credit Score measures your financial performance
Your GPA and Credit Score are important indicators of who you are during and after college, but in the long run it’s your Credit Score that really matters. Making good credit decisions now is like being your own boss and giving yourself a lifetime of raises at work. Make poor credit choices and you might just find yourself cleaning up after Pee Wee and paying back Guido three times the amount you owe him…if you last that long!
Steve Kozyk is the founder of the technology company Aqua Technology Solutions and a former credit card marketer on college campuses. For more information about how to use credit wisely, please visit his site http://www.aquatechnologysolutions.com