Student Credit

Student Credit Scores

Today, credit cards are as popular on college campuses on cell phones. However, before students start completing their applications, they need to have some basic information about how those cards can help and hinder their future.

Since most students have never had credit before, they may not know about credit scores. A credit score is a 3-digit number assigned to a person based on their credit history. That credit history includes the amount of debt owed, the timeliness of payments, and other facts.

When any person applies for credit, their credit score is used to determine whether they will be refused or approved. That means a good credit score is critical for individuals who want to buy a car or a home.

However, since a credit history has to be established before a person can have a credit score, credit cards are a good way for young adults to begin building a solid history. Unlike car payments which are much larger, credit card payments are more reasonable and are usually easier for students to afford so there is less risk of late payments or other behavior that may hurt their credit history.

Student Credit: The Dangers

Credit card companies now heavily market to students, especially college students. According to Truth About Credit, 78% of college students had credit cards in 2000. Of those students, less than half of them paid off their balances each month. The majority of student credit cards carried a balance from month to month.

Unfortunately, students have been taught about algebra and calculus but most don't understand the financial dangers of maintaining those balances. For example, few students know to read the fine print of these credit card offers. One promised 0% APR to college students on all of their purchases, which sounds wonderful. However, the fine print stated that the reduced APR only lasted for the first six months, then increased to around 16% on all unpaid balances. Plus, if a payment was late or missed, the APR skyrocketed to 30.49%!

References and Links

To learn more about credit scores, read "What is a Credit Score?".

You may also learn more about student credit cards by reading "College Credit Cards" and "Student Credit Cards".