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Why Your Credit Score in College Will Affect You After Graduation

What's the main goal of college? Most would say it's to get a degree so you can get a high-paying job after you graduate.

But, what might come along with this new job that you're working towards as well? Perhaps getting a new car, buying a house, or starting your own business one day? If so, it's important to remember that one of the key things involved with all of these goals will be your credit score.

Credit Scores

Your credit score is based on your credit history and is essentially a grade on how well you pay back money that you borrow. As you might imagine, lenders want to be sure you will pay back all the money borrowed when buying things on credit. Your credit score will give them this information.

If you have bad credit, then the chances of getting approved for any kind of loan are pretty low. And even if you do get approved, the interest rate you pay will be on the high side. Taking advantage of establishing a good credit score while you're still in college will make your financial life after graduation much better and much less expensive.

Establishing Credit

Now that you know what your credit score has to do with your financial life after graduation, you need to know how to get it on the right track. There are many ways to build good credit scores while in college.

If you are already looking to finance a new car, then the record of the payments you make will help establish your credit score. If you pay rent to a major apartment or housing company, then they may report your payment history and allow you to establish a credit history as well. Or the easiest way, if you have a credit card, will be establishing a credit history based on how responsible you are with your card.

Be Responsible withe Credit Cards

If you default on your credit card payments, then you will be sent to collections and will have to work out a way to pay the money back over time. The interest you pay over time will also be much more than what the original items cost, and your credit scores will suffer as well. This may not sound like the worst thing in the world, but future lenders will also shy away from you and limit your financial options. Be reponsible with your credit cards. Use them sparingly, pay your bills on time, and your credit scores should continue to increase over time.

Credit Cards

A credit card is the best and easiest way to establish credit while you are in school. Use it to spend money that you were going to spend anyway, and pay it off in full each and every month. Over time your credit history will become established and your credit score should climb into the good to excellent range. This will leave you with all the financial options you need when you graduate. You have to spend money while you are in college anyway, so why not utilize a credit card to do it and establish good credit in the process?

Getting approved for a credit card involves a review of your credit history and credit score. If you don’t have a credit history, or already have bad credit, then there are still options. Student credit cards are designed for college kids who might not have a credit history. Or you have the option of secured credit cards, such as the, which allows you to put down a cash deposit up front allowing you to get approved.

Either way, getting a credit card while you're still in college is a good idea as long as you use it responsibly. Don’t over extend yourself and buy things that you don’t have the money for in the first place. Use it for expenses you have to make, and use the money you were going to pay for it to pay back your credit card statement at the end of each billing period.

Better Financial Options

Establishing a good credit score while in college will put you on the right path for financial success after graduation. Whatever medium you use to establish credit, make sure that you are responsible in making payments on time. Then, after graduation, you will be able to qualify for whatever kind of loan you need, and you will be offered the best interest rates possible. This will not only save you thousands of dollars and a lot of headaches, but it will put you leaps and bounds ahead of many of your collegiate friends who never focused on building credit while in college.

This article was contributed by Matthew Coan, owner of the personal finance website Casavvy.com.

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Elisabeth Chan's picture

Elisabeth Chan is Creditnet's resident credit card expert. Elisabeth graduated Magna Cum Laude from Brigham Young University's Marriott School of Business.

When she's not rating and reviewing credit cards, Elisabeth enjoys gushing over her daughter (who is her exact clone), eating out (sushi and Chinese are favs), or attempting to conquer the pilates reformer machine (so far, all attempts have been futile).

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