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Credit-bility

Credit is an important part of your financial history. Whether you are interested in purchasing a car, a home, or even applying for a job, credit can either work for you or against you. Many people know that it is important to have good credit, but they aren’t exactly sure how to start establishing it.
Here is some general information that will be helpful as you strive to build good credit.

There are two ways in which your credit is measured- a credit report and a credit score:

Credit Report: There are 3 credit bureaus (Experian, Equifax, and TransUnion) in existence, which track your information regarding your credit. Institutions such as banks, credit card companies, your student loan servicer, etc., will send information to credit bureaus (not necessarily all of them) regarding your payment history, how much you borrowed, the number of credit accounts you have, and more. All of this information (good and bad), including a lot of your personal information, is on this report. A free annual copy of each report can be obtained at https://www.annualcreditreport.com/cra/index.jsp

Credit Score: The credit bureaus assign you a score ranging from 350-850, with 350 being terrible and 850 being excellent. A free estimation of your credit score can be obtained at https://www.creditkarma.com

Now for a misconception: Many people think that if they get the utilities in their name, having a cell phone contract or similar things helps build your credit. Unfortunately, those things do NOT help you establish credit. The only time that these items will make a difference (in building credit) is if your accounts go into collections; that will severely hurt your score and put a major blemish on your report.

I am not saying that having utilities in your name won’t be of any help to you, because it can. Businesses, property management groups, or banks will often ask for credit references. If you have been a trustworthy customer, you should have a strong list of credit references to offer.

Here are some easy ways to build credit while in college:

1) Getting a credit card and using it to make small regular purchases and paying it off entirely each month. Essentially treating it like a debit card. WARNING: If a credit card is used improperly or impulsively (exceeding your balance or missing payments) you will end up doing the opposite of what you set out to do.

2) Taking out a small loan at a bank. Loans of various sizes are available at banks and you could take out a loan, simply hold on to it, then repay it when it’s due (principle and interest).

Remember that a good credit history takes time to build and the sooner you get started the better.

Good luck!

Sam Honey
Peer Financial Counselor II
Powercat Financial Counseling
www.ksu.edu/pfc

Teaser Trouble

Have you recently received an offer for a credit card in your mail? Did the offer promise incredibly low interest rates, maybe even zero percent? That sounds like a great deal! However, remember that if something sounds too good to be true, it often is. The credit card companies are in the business of making money. So make sure to read the fine print before you make a decision.

Teaser rates, also known as introductory rates, are low interest rates that a lender charges you for a few months, or sometimes even up to a year, in the hopes of getting you to apply for and use their credit card. After the introductory-rate time period expires, the balance on your new card will be subject to a much higher interest rate.

Here are some credit card tips you should keep in mind:

  1. Typically the teaser rate will only last a few months, and occasionally up to a year. Before signing up for any card with a low rate, read the fine print to find out what the standard rate will be once the teaser rate period is up. These offers almost never clearly promote the standard rate, so you’ll probably have to look through the full terms to find out. Look for the APR rate, which is a standardized way of comparing yearly credit card interest rates.
  2. The credit card companies do not have to, and most likely will not notify you when the introductory rate expires. Be aware of this date if you intend to carry an outstanding balance on your card, because after this date your balance will be subject to the standard (higher) interest rate.
  3. Many individuals apply for cards with teaser rates so that they can transfer a balance from a higher interest rate credit card and, hopefully, reduce the amount of interest they are paying. However, when the intro period expires on the new card, they often find themselves right back where they started, paying a high interest rate because they couldn’t pay the balance in full.
  4. Consider the impact of repeatedly tapping promotional offers on your credit score. Too many open lines of credit, as well as too many recently opened accounts, can lower your credit score. The same can happen if you often close old accounts and open new ones to take advantage of promotional offers.
  5. If you would like to stop receiving unsolicited credit card offers in your mail, you are in luck! You can do so by following the link below to the Federal Trade Commission’s website, and follow the outlined steps: http://www.consumer.ftc.gov/articles/0262-stopping-unsolicited-mail-phone-calls-and-email

Credit cards can be very helpful, especially for students that want to start building their credit score. However, make sure to carefully read the fine print of the credit card offers, and follow the above tips to make sure your credit score or your wallet don’t take a hit.

 

Tomaz Bogovic, Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc
powercatfinancial@k-state.edu
785-532-2889