A few missed payments here or there on a cell phone bill may not be swept under the rug as easily as one would think. It might trail a student for years in the form of a negative mark on their credit report.
Combined with other irresponsible financial activity, even the smallest blemishes can add up and lead to the inability to open accounts or get loans with low interest rates, according to Libby Morsheimer, an adviser with Student Advising Services.
The FICO scoring system is the most common form for credit reports and ranges from 300 to 800.
"The higher your credit score, the better," Morsheimer said. "It helps companies determine how risky it is to lend you money."
Auto dealers, landlords, banks, utility companies, and telecommunication service providers can read the credit report of a potential customer, according to Morsheimer.
It's essential for students to make sure their personal information and payment history are correct.
"All that has to happen for your credit report to be distorted is for someone to sign up for a cell phone and be misheard when they give their social security number," Morsheimer said.
To obtain a credit report, Morsheimer recommends students use Fact Act, a company that provides one free credit report a year through their Web site: annualcreditreport.com.
To build credit, Morsheimer recommends using credit cards for substantial purchases which students have money to pay off immediately or in the short term.
"Using a credit card is like getting a loan in terms of credit building," Morsheimer said. "You can build good credit using a card as long as you pay off the balance each month."
Students without money should not use credit cards to pay for tuition, computers or books because these items are often covered under student loans. Even loans through major banks like Chase Bank usually offer far lower interest rates than credit cards.
Paying the minimum amount due or paying on the due date can actually have a negative impact on a student's credit score. Paying earlier can result in lowered interest rates, according to Morsheimer.
"If you absolutely must charge something or fall behind on payments, catch up as quickly as you can, and keep the 'emergency charges' to the necessities," Morsheimer said.
