Credit History and Score Basics for Students
10 Mistakes That Damage Student Credit Scores
College students are often flooded with credit card offers, because they tend to be easy marks due to their lack of credit management experience. As a result, they often find themselves saddled with credit card debt while they're still in school, and unable to pay it off. Due to their inexperience and unfamiliarity with credit monitoring tools, credit reports and credit scores, they graduate with unsecured credit card debt and hefty college loans. That's a lousy way to begin a career.
To help you avoid making such a costly mistake, here are 10 student habits that can kill your credit score:
- Missing a payment. Most students are inclined to think that being late or missing a payment isn't a big deal. It is. A missed payment hurts your credit score and stays on your credit report for years.
- Opening an account to get freebies. Filling out a credit card application just to get a free t-shirt, goofy hat, or official university credit card isn't worth the risk.
- Applying for multiple credit cards in a short period of time. Most students don't realize that the credit bureaus regard this as very risky behavior, which in turn drives their credit scores down.
- Being careless about security. Rooms in dorms and fraternity houses are frequently unlocked, which gives thieves easy access to purses and wallets with credit cards in them.
- Taking out cash advances. Most students fail to notice that cash advances usually come with much higher interest rates, which keep on ticking until the balance is paid off.
- Using credit to buy everything. Reaching for the credit card to pay for everything can lead to surprises when the monthly statement arrives.
- Failing to pay the minimum. When this happens, a student's credit score goes down, they get hit with a steep fee, and it's noted on their credit report.
- Credit card fraud. There have been some documented cases where a student used a credit card to charge a spring break trip and then, to avoid paying it off, reported the credit card as stolen. This can damage your credit history and score if, in issuing a new account number, the credit card issuer erases your history from the original card and elects to make a hard credit inquiry, in effect treating you as a brand-new customer. In addition, making a false police report is also a crime.
Opening a merchant account for a discount. Along with tip #3 above, this simply gives students another opportunity to get into unmanageable credit card debt and lower their
- Putting a night out on a credit card. Students who want to join their friends for a night out but don't have the cash often choose to put an evening's tab on their credit card. But long after their friends have forgotten about this generosity, the credit card company hasn't, and it can take a long time to pay it off.
It's no accident that every one of these student credit score killers involves credit cards. Students' inexperience with credit in general — and credit cards in particular — often leads to painful lessons that they end up paying for long after they graduate. The average college graduate owes nearly $3,000 in credit card debt 1 .
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- Credit Score Myths
- How Credit Scores Are Calculated
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