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College Graduates & Credit

If you’re a recent graduate whose found your dream job, you’re about to discover that you won’t be achieving many of your dreams if you don’t have access to credit. So if you didn’t establish credit while you were in school, now is the time! You’re obtaining credit during a time when lenders are taking a very close look at applicants’ ability and willingness to pay on time. Easy credit has fallen victim to the current economic crisis.

Here’s some advice for those seeking credit for the first time:

  • Develop a relationship with a financial institution. Open an account as soon as you’re employed, and if it’s offered, sign up for direct deposit of your paycheck. Have some of that check put automatically into a savings account. If you have automatic savings and don’t overdraft your account…you have established a relationship with your financial institution.
  • Apply for credit judiciously.   Applying for too much credit at once can send the wrong signal to the lender, making it appear that you are desperate for credit.  Additionally, too many inquiries can have a negative impact on your credit score, and too much plastic in your wallet only increases your temptation to spend.  It’s smart to start slowly and move along the credit path at a measured pace.
  • Be aware of how credit works; then work it to your advantage.  One line of credit that has been active for six months is usually enough to generate a score. Examples of different lines of credit would be a credit card, a personal loan and a car loan.  It is critical that you pay bills on time and don’t charge more than 30 percent of your credit limit.
  • Consider a secured credit card.   If you’ve been denied credit based on your own merit, apply for a secured credit card from your own financial institution. With this product, you put up money as collateral for the card and are granted a line of credit in that amount, so the issuer has no risk.  Handling this type of credit responsibly will likely lead to being offered an unsecured card, and meanwhile you’ve built a positive credit history.

The person who understands the importance of treating his or her credit obligations responsibly today is laying the foundation for a stable financial future.

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