Smart students add good credit scores to their school agenda

With all that students have to consider this fall as they return to their education, they would be wise not to forget the importance of building a positive credit report.

Students in high school and college are just a few short steps from starting their own life. At this point, they are already consumers; buying products and establishing their spending preferences. Once they have completed their post-secondary education they will be looking for a job, a place to live and a reliable means of transportation. Having good credit will make getting started easier. To ensure this happens, students should begin building their credit rating while in high school or college. They also need to understand what a credit report is and what it can mean to them.

Experian, one of the nation’s three credit bureaus to whom businesses report your credit standings, defines a credit report as, “simply a printed or electronic representation of your credit history.” The report acts as a window for potential new lenders or service providers to determine whether or not someone is good at managing their debt and repaying it. When individuals take out a small loan or establish a credit card in their name they begin their debt accountability. Each month they are responsible for paying on or paying off that debt. Lenders who extend credit to someone then report on that relationship to Experian, Equifax or Transunion. Lenders share how much individuals owe and their payment history on any accounts with the credit agencies.

For students it is important to stay current on bills they may have while completing their education. As an example, if they neglect to pay their cable television bill for several months the company may not immediately make a report to a credit bureau. However, after a period of several months without payment that bill may be listed on their credit report as being turned over for debt collection. Negative “hits” such as this can greatly affect ones overall credit score and may prevent a lender from extending money in the future. In fact, having a bad credit standing can even prevent someone from getting a job. Employers frequently check the status of an applicant’s credit report to get an idea of how responsible he or she is.

Landlords, utility companies, mortgage lenders and car dealers all check credit prior to agreeing to enter a financial relationship of goods and services with people. Students who start early to build a positive credit rating and then work to grow and maintain that good score through timely repayment of lenders will be rewarded by easier access to loans for the things they need or desire. They will also be offered the best interest rates and the lowest down payments on those goods and services.

For more information on good credit, see these other Michigan State University Extension articles:

Websites with more helpful information:

Related Articles