Three Digits: Crucial For College Students

Credit Scores… A Dr. Fretz favorite.

As a college student, you may not realize the immense impact that three simple digits can have on your future financial well-being. Your credit score, just a number between 300-850, is one of the most important numbers in your life as you become an adult. From getting approved for credit cards and loans to securing an apartment rental and even job opportunities, this number weighs heavily on your life.

Straight up, your credit score represents your creditworthiness or how likely you are to repay debts based on your borrowing history. Payment history makes up the largest portion, as the credit score rewards and encourages on-time payments and penalizes failure to pay ANYTHING, no matter how small. Other major factors include credit utilization ratio, length of credit history, types of credit used, and number of recent credit inquiries.

Building credit from scratch is challenging for college students like us with limited or no borrowing experience. However, establishing good credit habits now will pay dividends throughout your life in the form of more favorable interest rates on loans, lower insurance premiums, and increased leverage in negotiations. Simply, spend small amounts and PAY THEM BACK ON TIME.

One of the easiest ways to start building credit is by becoming an authorized user on a parent's credit card and making occasional small purchases that you pay off in full each month. You can also explore student credit cards and begin reporting rent payments to credit bureaus. It’s quite simple… keeping balances low, and making payments on time will steadily raise your score.

While a poor credit score may not affect you immediately, the consequences of neglecting it become very real after graduation. Prospective employers increasingly check credit reports for new hires. An insufficient score can make landlords and lenders view you as a high-risk tenant or borrower. You may have to pay exorbitant security deposits or get denied for loans and apartments altogether.

Your credit score holds the keys to qualifying for mortgages, financing major purchases like cars, and even getting hired for your dream job someday.

Those three digits are worth your attention…