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A 'Deadbeats' Approach to Excellent Credit 5 tips use credit cards to your advantage while on a College Budget
Make it your personal goal to have credit card company insiders refer to you as a 'deadbeat' or a 'freeloader'. That is banking industry jargon for someone who pays off their credit card in full each month.
Those are degrading names for people who are handling their finances responsibility; but you have to look at it from the credit card company's point of view. They love 'revolvers' which are people that carry balances on their card; that's where they make their money. If you make minimum payments or pay late they like you even more because they can raise their rates and charge you additional fees. So strive to be the credit card company's worst customer. This is the first step to long term college budgeting and great college financial planning.
Use credit to your advantage Before you warm up the shredder to annihilate your cards, it's important understand the benefits of having one. They do a lot more than just help you rent a car or book the hotel room. Credit cards are a critical tool in your financial toolbox while staying on a college budget.
Credit cards offer you an easy way to boost your credit scores. Having excellent credit scores will help you qualify for loans easier, receive better terms (lower rate, lower cost) and help you avoid the embarrassment of being denied for credit. To understand why we need to look at how credit bureaus evaluate you. This will be important also to look at while on a college budget or for college financial planning.
Credit bureaus grade you based on your ability to repay debt. So if you don't ever use credit - your credit scores will actually suffer because of it. It's just like school. If you don't take a test how can the teacher grade you? Well same thing with credit cards. You need to prove that you have the ability to repay debt and you are rewarded with a higher credit rating.
To use credit cards to maximize your credit score there are some simple steps you can take.
Before you start this program it is important you're in the right financial position to do so safely. It is highly suggested before you get your first credit card that you have: o Six month emergency fund. You should have six months worth of your monthly bills set aside in an emergency fund. In other words, if your bills are $1000 a month you should have $6000 set aside. That way in case anything unexpected comes up you're able to stay out of credit card debt. o A working college budget. You know if your budget is working if you are able to save money each month. o Organized bill payment method. It is highly suggested that you set up an online automatic bill payment for any company that reports to the credit bureaus. This safety measure will ensure your bills are paid on time. o The ability to control your spending. If you have trouble controlling your spending start out using secured credit cards until you can improve your spending habits. o Identity theft protection measures in place. Shred all financial statements and protect your pin number at all times. In addition, check your credit once a year or purchase a credit protection plan.
By following those five simple steps you will be well on your way to 'freeloading' your way to a rock solid credit history.
Vince Shorb, author of 'Financially Free by 30', has personally reviewed over 10,000 credit reports. More practical credit advice and free training videos can be found at www.FreeBy30.com. |