Hey guys, so I am a college student now! Whoop Whoop! I am currently attending Grand Canyon University online. And since I am a college student, that means I am currently working on trying to find ways to pay for my school. This is a scholarship essay I wrote that has to do with credit scores. I think this is something that is important for students to read and understand. Check it out below! Thanks! Have a great week!
Financing and credit are not something that college students typically learn or are being educated about. This can be a problem because students often just receive student loans and dedicate their entire time to their degree program, not learning how to work, manage money, or earn credit, which is useful later in life. It is important for students to think about the future and how they are going to accomplish what they need financially.
A credit score is an important part of financing. Many students do not understand how their credit score is compiled and what actions they can take to form a good score. A credit score is a number. 35% of your score is based on your debt history, 30% is based on your debt level, 15% is based on the length of time you’ve been in debt, 10% is based on new debt, and 10% is based on type of debt (daveramsey.com). Do you notice a common word in all these? A credit score has to do with debt; the amount of debt, the type of debt, how one is paying off that debt, etc.
People usually accumulate debt by getting loans, either for a car, house, or just something personal. One can also collect a smaller amount of debt by using credit cards rather than cash, checks, or a debit card.
I have always been taught how to handle money responsibly. I did not get a credit card or loan for anything until I was eighteen. I learned to budget the money I was earning and only spend money that I possessed. Once I graduated high school, accepted a job, and began attending college, I got my first credit card and loan. I did this to start building my credit history during college. I am going to need a good score later in life for better interest on loans, better insurance on cars, and many other discounts.
However, keeping a good score during college can be challenging. It is difficult to be responsible with money you have not earned yet. I wanted to be more responsible with building up debt and earning my credit score.
I started with a small car loan. I desperately needed car for my job, so I bought a used car for a small amount of money. I got a small loan on it, and will pay off that loan in around two years. I have nearly two years left of school, and so I will completely own my car by the time I finish my degree program. For my payment each month, I set up auto pay where the bank automatically takes the payment cost out of my account once a month. This helps me keep from making a late payment; the only thing I have to keep track of is making sure I have enough money in my bank account every month. This has really helped my credit score because this loan is a larger amount of debt than my credit card and I am constantly making my payments on time and in full.
I got a credit card, but I chose to get a specific student card. This is a recommended card by many financial professionals to start out for college students (Kuchar, 2015). This specific student card gives me a maximum amount that I can put on the card, usually around five hundred dollars. This keeps students from spending money like crazy and ending up in a large amount of debt. It just gives them a little amount to help with a few things on or off campus.
I try to put a very limited amount of my bills and finances on my credit card. I use it for my car insurance and gas every month, which I pay off by the months end. I also use my credit card for my phone payment and purchases online. I use my credit card online rather than my debit card for security and identity purposes. It is safer to use a credit card than a debit card. I use my debit card for everything else.
A credit score is important, but it is important to earn a good score responsibly and not gain all this debt while still in school. Keeping the debt simple will truly help while still attending school, and also paying off the debt every month (Kuchar, 2015).
If a student has a bad credit score, a good way to raise it is to stop borrowing money, speak with a financial counselor, and create a plan to start making payments on time. It is smart to learn these things before one starts attending a college or university and becoming an adult.
I was fortunately raised in a home that taught me how to be financially responsible, not every student gets that. I am currently working towards a major in education. I really want to work at getting students financial education, because not every parent provides their children with this education. This information will help the future generations in this world understand how to manage money and not be in an enormous amount of debt.