Your Credit Score

By Susana Acosta

“Would you like to save 15% by…?”

No. This is the line that sales associates at most store counters will give you, and your answer should always be no. They most likely want to offer you the awesome opportunity of ruining your credit by filling out an application for their store credit card. Don’t do it. Here’s why.

• You will probably be declined.
If you are a college student without a job that’s giving you a significant income every month, then credit companies know that you cannot afford to make their payments. Let’s say you do have a job, or you have been approved for other cards in the past, and you are still not approved for that credit card. The reason could be that because you are still very young, your credit history has not yet been established. Put simply: you don’t have a track record as far as credit goes, so companies have no indicator of how you handle credit cards. For instance, do you make payments on time? Do you tend to max out your card each month and then skip payments the next month? Do you make the minimum payment required or pay it in full after you’ve utilized the credit amount? These are all important factors to be considered when someone is lending you money-which is essentially what a credit card company does-so without being able to answer these questions, they will consider you a ‘high risk’ and decline your application. And guess what? Each time you are decline for a credit offer, your credit score is affected; even if it is only docked for a few points, this is visible on your credit history and other companies will see it next time you try to apply for a credit card, a loan, or anything else involving borrowing money from a bank or credit entity.

• If you have other credit cards, you don’t need another one.
It may seem tempting to have more than one credit card. Free money, right? No, this just means you now have more debt, if you plan on using all of these cards. If you know how to manage them, then do it. It is your life, after all, but most college kids do not know what they are doing or how their financial choices are going to affect them in the long run. It’s my hope that after reading this post, you will learn a bit about how significant your credit score is and how it can impact the rest of your life. And it all starts with one credit card. Then another. And another! If you can’t afford it, don’t buy it. With credit cards, don’t apply for another one if you have two already. Just knowing it’s in your wallet could get you in trouble at the bar or online when you shop or even if someone steals them!

Your credit score varies from 0 to 850, with the latter being the highest you can achieve. For credit cards, try to keep your balance below 20%. If you are the person that’s always using 100% of your limit, this looks very bad for you. Over time, your score will increase because your credit history will become more established, and credit hits (i.e. declined credit offers, missed payments, defaulted loans, closed accounts, etc.) will disappear from your report eventually. It is important to remember that some things will remain on your history longer than others though, so do everything possible NOW to only have positive marks on your report. There are lenders and companies that will understand if your credit score is low due to only having had a credit card for six months versus someone who has had theirs for six years, but it will be difficult for them to overlook that time you maxed out your card, had an immensely negative balance in your bank account, and then had your accounts closed. Good behavior is rewarded, and you have to build up. The best way to do this is by starting small. Have your parents get you a credit card that is under your name and at a low limit, like $200, and only use it for emergencies. Then, pay it off each time you use it. That’s it.

So many Americans go into debt every year or have to declare bankruptcy because they are so far deep that there is no way they can ever repay all the thousands or even millions that they have borrowed. Don’t let that be you. Waiting for your credit score to rise is painful and stops you from amazing opportunities in the future like buying a new car, a new house, or in some work places, even from applying for a job.

Next time you go shopping, if you want to save 10 or 15% on that purchase, instead of signing up for a credit card with the store, just remove an item!

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