Collegepreneur Staff Writer
If it hasn’t already happened, it will. Credit card companies will soon be all over you like a cheap suit. You’re a powerful consumer and the credit card geeks know it. But here’s the deal. You’ve gotta be smart about this credit card thing. If not, you’ll find yourself in a world of unnecessary trouble before winter break. And that’ll just ruin the fun trip you’ve got planned.
Most of you already know this (wink
wink) but for those of you who don’t mind being reminded for the oh,
cabillionth time, protecting your credit is the best college gift you
can give yourself. Managed properly, good credit is a valuable asset
when applying for auto loans, apartments, student loans, jobs or
mortgages. Plus, it’s one of the safest and most convenient ways to
make purchases online
or over the phone.
First, let’s clear
something up. Credit in and of itself is not evil. Quite the contrary.
Credit can be an entrepreneur’s most valuable asset throughout the life
of a business. The key is being a smart
credit manager.
Here are a few tips to keep you on the straight and narrow.
Tip #1: Use credit cards only for emergencies.
The spur of the moment trip to Vail, Colorado is not an emergency.
Fun, but not an emergency. We’re talking about unforeseen financial
urgencies like that required book that the professor sprung on
you at the last minute or the fee to have the flat on your car fixed.
Tip #2: Opt out of the direct mail offers.
It’s a lot easier to just say no if you never see the enticing colorful
envelope with your name in the clear window. You can call 1-888-
5-OPTOUT (1-888-567-8688) to have your name removed from
direct mail marketing lists. One call is all it takes. You can also opt
out online as well at OptOutPreScreen.com.
Tip #3: Use credit wisely
If you have a credit card understand that this plastic packs a powerful
punch. Your FICO score (created by Fair Isaac Company) is used
to determine how favorable an interest rate you get on things like
cars, houses, and loans. A FICO score can range from 300 to 850,
with 850 being about as perfect as you can get. Individuals with
scores above 700 tend to get favorable rates while those below 700
sometimes are treated like navel lint.
Tip #4: Know the score
There are three national credit reporting agencies: Equifax, Experian,
and Transunion. Each has its own system for generating your
FICO, so it’s smart to know all three scores. You can go to www.
myfico.com to find out your score. Remember, it’s always better to
know your score before you apply for any kind of credit, job, insurance,
or loan. Nobody likes to be surprised. Plus, you’ll feel more
empowered if you know your score heading into any scenario.
Tip #5: Pay the full amount due each month
If it sounds like extreme advice it is. Getting into the “monthly
minimum” mentality will only lead to more debt. Instead of conditioning
yourself
to pay as little as possible, how about disciplining yourself to
spend
within your means so that you can pay the bill in full each month.
Tip #6: If in an extreme case you cannot pay the full amount
due, pay at least the minimum due. This will keep your account
in good standing. If you pay more than the minimum,
you’re could eventually reduce your interest.
Tip #7: Don’t be late
If you miss a due date, you may (read: will likely) be charged
a late fee. Penalties can range from $19.99 to $59.99 depending
on your creditor. And, a late payment may be recorded
on your credit history. To be on the safe side, sign
up for online payment, automatic payment or send in your
payment at least 7 days before its due date, even if you use
online banking.
Tip #8: Spend responsibly
Don’t exceed your credit limit. If you exceed your credit limit,
a fee may (read: will likely) be assessed. Also know that while
it may be easy to take a cash advance, they are expensive. A
cash advance is simply a very expensive loan. The interest
rates are sometimes over 22%. Most companies charge an
extra fee for each cash advance and may charge a higher APR
than for regular purchases.
Tip #9: Protect your good name
Be careful about how and when you use your credit cards.
Never loan your card to anyone even if you think “they’re
good for it.” Schedule a time to check receipts against your
monthly statements and report errors immediately. Most
banks offer some kind of fraud protection so be sure to ask
about it before you sign up with them. When you move or
change addresses, notify your bank and other card issuers
immediately.
Tip #10: Celebrate you
Give yourself a high five for being a good steward. It’s easy
to beat yourself up over mismanaging your money. We recommend
celebrating even small successes. So go ahead, pat
yourself on the back if you’re doing a great job! And if you’re
not where you want to be yet, remember you can make a
positive choice in this moment.
Bonus Tip: Stay on the offense
Check your scores regularly. You always want to know what
creditors are saying about you. Regular checks can also keep
you on top of any potential fraudulent activity. Don’t worry,
your self-checks do not hurt your score as some companies maintain.
