Graduating from school is a big step toward independence. Part of this new responsibility means learning how to manage credit. For many graduates, it will be their first time handling credit cards and loans.
To get ready, here are a few important tips every new graduate should know.
1. Start building credit as soon as you can.
Your credit score is important for nearly all aspects of your life. If you ever want a car or home loan, you’ll need a decent score.
New employers and landlords also could base their decisions on your credit score. This is why you should starting building credit as soon as you can after graduation.
Get a credit card set up and be sure to make your account payments on time. This will start building up your score.
2. Strictly follow payment due dates.
When you’re managing loans and credit cards, you need to be sure to make your minimum payments on time. If you miss a payment, you’ll run into all kinds of problems.
Your lenders could charge you a steep late payment penalty. They could also increase the interest rate on your account, forcing you to pay more in interest each month.
Lastly, the creditors could report your late payment to the rating bureaus and this will badly damage your credit score.
Make sure to closely track all deadlines so you pay them. If you’re worried you may forget, consider setting up automatic bill payment through your bank. This way you’ll never have to worry about late payments.
“Check your credit report every year to
make sure there aren’t any problems.”
3. Be conservative with credit card applications.
After graduation, you’re about to get flooded with new credit card offers. These cards will all be promising great new bonuses and features and it will be tempting to sign up for all of them.
Be careful not to apply for too many new cards at the same time. Each application creates something called an inquiry into your credit report, which hurts your credit score.
If you apply for too many at once, there’s a good chance your applications will be denied.
4. Don’t carry large balances.
You should try to keep the balance on your credit cards as low as possible. When you don’t pay everything off at once, the credit card company will charge interest on the balance.
Your credit score is also affected by large account balances. If you are close to maxing out your cards, it will drag down your score.
5. Check your credit report regularly.
Your credit report lists your outstanding debts, your credit score and an explanation of your credit score.
It’s a good idea to check your report every year or two to make sure there aren’t any problems. This also prevents identify theft because you will see if someone else opened an account under your name.
Keep these tips in mind as you get used to the world of credit. If you follow all of them, you should be well prepared for adulthood. Good luck!
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