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Fresh college grads - learn some credit tips

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By: Joy Mali
on 12th Aug,2013

The end of college is the start of a new journey for recent graduates.
Fresh college grads - learn some credit tips

The end of college is the start of a new journey for recent graduates. Most are excited to create and send their resumes out to prospective employers, looking forward to starting on their career paths. Many recognize that this is, also, a crucial financial transition time for them.

This is the perfect time for them to become aware of and more cautious in their financial practices, to help them build a strong credit history which will allow them to gain access to credit and loans when they need them. So, for those who just recently finished college, be sure to consider the following credit tips for graduates:

• Choose cards selectively and apply seldom- Credit cards are not free money. No matter how attractive banks make them out to be, keep in mind that there is always a catch—perhaps high APRs after a year, or annual fees. Therefore, be selective about the credit cards for which you apply and apply only for one credit card at a time. Just like loans, credit cards require lenders to conduct a hard inquiry. A hard inquiry is a credit check made by lenders and banks when you apply for any type of credit. So if you apply for multiple cards at the same time, there will be multiple hard inquiries. Too many of these in a short period of time would not only hurt your credit score but would also not appeal to lenders. This may make it difficult for you to get approved for credit in the future. So when applying for credit cards, it makes sense to monitor your credit scores. If your credit scores decrease because of an inquiry, wait for the score to improve before applying for another credit card. Another reason to apply for only one credit card at a time, and to be selective about the card you choose, is that you want to use your card to help build credit; but, you do not rack up credit card bills that you might find difficult to repay.

• Use your cards wisely- To start building a strong credit history, use your card sparingly. Do not use it for high-priced items or for anything that is more than 30% of your credit card limit, as you do not want to exceed this credit utilization ratio. Instead, you might want to use your credit card to pay for everyday items, preferably things for which you are earning rewards, points, or cash back. Make absolutely sure to pay the bill in full and on time each and every month.

• Pay down your student loans- Once you have graduated, you may start to feel daunted when your first student loan payment comes due. The good news is you have two options if you are unable to make the payment: you can apply for a deferment or forbearance. These are ways to postpone your payments for a little while. Although you may be temporarily relieved, the bad news is they are not the best options as they will still accrue interest. If you have no income because you haven’t yet found a job and are still living on an allowance, do not default on your payments. Instead, negotiate with your lender and try and make a reduced payment every month. Yes, your repayment time frame will be longer, but at least you are making your payments without missing or defaulting on them.

• Pay your bills on time- Be aware that your payment history contributes to 35% of your credit score and your credit reports include information about whether you pay on time and in full. To make sure that you do not forget and miss a payment, set up alerts and use online payments to manage your bills. Keep in mind that any payment that is more than 30 days past due will be reported to the credit bureaus as a delinquency. To make sure that you have a healthy credit history, stay on top of your bills.

• Check your credit report- Check your credit report regularly. The three major credit bureaus (Experian, TransUnion, and Equifax) each provide one free copy of your credit report once each year. Checking a copy of your report gives you information collected by that one company. For a more comprehensive view of your credit situation, a credit monitoring service might be more appropriate. That way you can check your report and scores whenever you like. Once you get your report, make sure to examine the transactions one by one. Credit reports sometimes contain errors, and if the mistakes are not corrected, it may impact your ability to receive financing on things like a mortgage or a car loan and may limit your access to the best credit cards.

Even if you are busy preparing your resume and practicing for future interviews, make sure that you do not ignore the financial aspect of your transitional period. The end of college means the start of your adult life. Having a good credit standing will help make your life a lot easier and will go a long way toward ensuring your own financial security.

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