Preface from Editor, Brett Napoli
College life is a rollercoaster of an experience. The hustle and bustle of class, studying, relationships, partying and balancing partying and studying can be a difficult task. But once the dust settles, the grades come in and its time to start this game dubbed “real life” there are a few things you might wish you worked on before graduation.
A huge element of the game of real life is learning how to manage your finances. College life is notorious for leaving students with almost no money to get established once they’ve graduated and headed into the next phase of life. As you make the transition from student to young professional, it’s important to realize how important your credit score is to the world, especially for when you plan to buy a home, start a business, invest and even get a job. Here are some tremendous tips from our staff finance expert, Dan Santo, former employee at GE, Best Buy, IBM and others.
Increasing Your Credit Score
Good credit translates to lower interest rates for borrowers. Here are just a few quick tips that can help put you in a better position under the discerning eye of a credit underwriter, bank or lender! Remember, following these tips won’t improve your credit right away, it is measured monthly over time. However, you can start now by following these tips to get you on the road to a higher Credit Score.
Do you have past due balances that have been neglected? They will show up on your credit report when you want to purchase a home, car or are in need of Student Loans. You need to make sure you bring them up to current status whenever possible. Meaning, pay them off – now!
Paying down Debt helps your Credit Score
Do you have outstanding debt that you can afford to pay off right now? Try to get these accounts down to a zero balance, or at least a lower balance. If your cash on hand doesn’t allow you to do this, try to distribute the debt amongst other open credit cards – but don’t get caught by going in over your head.
You can also consider opening a new line of credit and transferring part of the balance off a card that is close to being “maxed out.” If you can get the resulting balances below 50% of the available credit, you’re on the road to improving your credit score considerably in most cases.
Closing Credit Cards or Credit Lines can hurt your Credit
- Do not close existing credit card accounts, even if you don’t want to deal with the company any more. Believe it or not, the credit history is a good thing to have! It hurts your credit when you close accounts where the lender has established a credit line..
- See if your credit provider will increase your available lines of credit. This can, in turn, reduce the overall debt ratio, but only do this if your credit card company can do that without a hard credit inquiry. It may reduce your hit for having balances over the 50% ratio on your card. This would definitely help improve your Credit Score.
- Your first goal should be to pay off the Credit Card with the highest interest rate and pay that down as quickly as possible, this process is called laddering. One great way to pay down those high interest rate cards is to pay a separate payment every 14 days toward the credit card. Making these 14 day payments equals one extra payment made at the end of the year.
For higher interest rate cards, pay higher amounts than the minimum payment and on low-interest rate cards just pay the minimum till the high rate cards are paid off.
Now you’re Married and looking to own a Home: Some Facts.
- When married couples keep separate credit card accounts, some or all of the balances can be transferred to one spouse’s list of accounts. This gives the other spouse an opportunity to increase their credit score and designate him or herself as the sole borrower on the mortgage loan. Ownership of the home can remain in both names!
What about Charge Offs or Past Due debts?
- Do you have past dues and charge-offs within the last two years?
(According to Wikipedia, a charge off is defined as: the declaration by a creditor (usually a credit card account) that an amount of debt is unlikely to be collected.)
Pay them off now, if you can! Past dues older than two years will have little to no impact on your credit score if they are paid, but can possibly bring the score down, which is something you don’t want to do. Focus on that 2-year time frame.
Check your Credit Report for Errors
- Do you see errors in your report? Request the credit bureau delete any outstanding debt that is incorrectly charged to you, or things that should have been removed that you have already paid. They have an obligation to reconcile this within 30 days.
If you see items on your report that are less than two years old and you have the money to pay it off now, mark the back of your payment check with the following notation: “Accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit record.” If necessary, you can use this cancelled check as proof of the transaction in the event the outstanding debt is not removed promptly and interferes with the closing of your loan.
These points were given from resources of the NFCC National Credit Counseling ( 800) 388-2227, Clark Howard site where he recommends “You may want to check out a book to Invest in yourself” Six Secrets to a Rich Life by Marc Eisenson”