Credit tips for the uninformed student

Taylor Villescas

Part of growing up is being entrusted with this tiny square of plastic. Not a big deal, right?

Well, depending on how you treat this tiny square, could determine a lot for later in life. Credit cards aren’t inherently bad, but many students go overboard with buying things they don’t need, or are too nervous about incurring even more debt, they don’t even go near a card. And most of us don’t even know what “credit” really is.

Fear not, this is a safe place where innocently ignorant finance questions can be answered.

What the hell is credit?

Credit is a measure of how trustworthy a person is when it comes to their finances. A person’s credit is made up of their credit report, which ultimately determines their credit score.

A credit report is a collection of someone’s history of paying bills, number of accounts and credit cards and how long they have been in use, credit limits, recent credit card activity and any bankruptcies, foreclosures or other debts.

A credit report is then used to determine a credit score. The number is derived once credit history information is plugged into an algorithm, however, there isn’t any one algorithm. Companies and lenders use different formulas, so credit scores can vary.

What is a credit score used for?

A credit score basically tells companies whether or not you’ll be able to pay them back, and do so in a timely fashion. It can determine whether you get approved for a new apartment, house, car or yet another student loan.

Long story short, it’s important.

How can I establish good credit?

Let’s get philosophical here: what actually is good credit? While different companies use different formulas, most credit algorithms have a range of 300 to 850. Scores that are 700 and above are considered “prime” scores, and is what everyone strives for.

In order to achieve a higher score, the Consumer Financial Protection Bureau recommends the following points to consumers:

-Pay all of your bills on time

-Don’t abuse your plastic! Don’t overuse the credit you already have.

-Check your credit report for any errors, and dispute them as soon as possible

Crap, I’m in debt! What do I do?

The Huffington Post published an article last May about easy ways to get out of debt.

The author suggests a few simple solutions to this seemingly immense problem.

First, take a deep breath. Panicking over the bills that are piling up isn’t going to put more money in your bank account. Lower the anxiety, accept the situation as it is, and calmly move forward. Congratulations, now you’re handling things like a “mature adult”.

Next, make a list of everything you spend. But don’t do it just out of memory and don’t solely rely on your budget; be honest, you always underestimate about how much Taco Bell and alcohol you purchase throughout the month. Huffington Post recommends keeping track of every penny spent in the next 30 days, in order to create a more accurate portrayal of what you are paying for (Taco Bell and alcohol).

Finally, once a realistic budget has been created, commit to spending less money and increasing your revenues. Pick up some extra shifts at your job, offer to walk your neighbors’ dogs (or cats or goldfish) and stop buying useless stuff, like Miley Cyrus’s new album.

If you are still running into financial troubles, consider taking some money management courses on campus, or visit your bank to discuss possible options to help decrease your debt.