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Another question from the readers:

Hello, I’m starting to get out on my own, and I’m heading off to college next semester.  One of my co-workers has suggested that I get put on the books so that I can start to establish my own credit history.  Honestly, I don’t know anything about credit, credit scores, or credit history, so I turn to you guys to hopefully steer me in the right direction to manage the meager amount of money I’m going to have as a college student.

Your coworker is actually pretty sharp. Credit histories take some time to build up (properly, at least), so it’s good to have a general game plan when you enter College.

When you enter College, you will probably get an insane amount of credit card applications- even from your college. While it’s something of an ethically questionable practice, many colleges (especially private ones) connect with local banking institutions to provide their students access to credit cards and banking resources. That being said, now is the time to start building up a credit history, it just has to be done carefully.

Here’s what I recommend: Get a credit card and use it only once a month for a meal or something. Credit cards are massive pains (and many argue against their existance as a whole), but you generally need them for various purchases, so it’s important to play the game early and build up a reputation (which is manifest in your credit history). However, as I’m sure you’ll notice in college, you can easily way overcharge crap on your credit card and get into massive debt- and it can ruin your future job opportunities. Too many people graduate from College with huge amounts of debt- debt from credit cards AND tuition.

Long story short, get a credit card to “officially” be using their services, but never use it except once a month (so it stays active) and pay it off immediately. If you need to carry a card with you, carry a debit card- and only when you absolutely must. While you will build up your credit history, you will stay out of debt, and essentially begin earning free services from the credit card company. Naturally, the company will be making SOME money off you (off of the people you buy from, rather), but in the long run, they’ll be giving you a free ride to a solid credit history.

So far as general money management, it isn’t that hard so long as you learn to budget and watch yourself:

1. Drinking in college is expensive and stupid. Nowadays, bartenders will actually expect you to hand them your credit card and let them charge away as you drink away. If you want to drink, go to parties or whatever and grab what’s free. This also applies with food and “major/minor parties”, though professors will get angry at you for that (I know this from experience).
2. Some campuses will be more expensive than others. On some, living on-campus is cheap, others will charge you an arm and a leg to do so. Figure out what’s cheap- if you live off campus close enough to bike, then you can save lots of money- always check prices.
3. Avoid nasty fees. Private universities love to tack on “bad” parking charges and/or food charges to make up what they spend on the football team, so avoid bad practices.
4. Build a budget and stick by it. Let’s face it, all you really need is food, water, clothing, a roof, and, in college, an internet connection. I’m not supposed to really say this, but you can download so much stuff now, it’s useless to buy most entertainment-related things.

So there you have it. I kept it fairly simple, but hopefully it should be straightforward enough to help. Good luck!

Tags: College, credit score, Finance, gtd