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College Students – Prepare Your Credit For The Real World

Today’s guest post is provided by Ed O’Brien. He is an expert writing in all things pertaining to personal finance, specializing in credit repair. For more of his articles, visit his blog: CreditRepair.org.

A 2009 study by Sallie Mae revealed that the average college senior has $4,100 in credit card debt and 85% of college freshmen carried a credit card balance with only 17% of college students paying their credit card balance in full every month. Credit card debt can be disastrous for college students who typically don’t have the income to pay for a credit card every month on top of living expenses and junk food.

Credit Cards vs. Student Loans
Unlike student loans — where your payments don’t typically start until six months after you graduate — your credit card bills will be due within weeks of spending. While you’re out looking for a job, you still have to make your credit card payment, which could be as much as $100 on a balance of $4,000.

Protect Your Credit and Stay Out of Debt
The first few years after college graduation are some of the toughest years of your life. While you’re trying to get established in the real world, the last thing you need holding you back is extra credit card debt and a bad credit score. So it’s important for you, as a college student, to protect your credit and stay out of debt.

The biggest thing you can do to avoid credit card debt is avoid charging a balance you can’t afford to pay off at the end of the month. Contrary to what you’ve probably grown up believing, credit cards aren’t for purchasing things you don’t have the money for. If you charge something you can’t afford to pay for, you then risk missing your credit card payments and dealing with a slew of negative consequences.

When you miss a credit card payment, the credit card issuer charges you a late fee that’s equal to your missed payment or $25, whichever is less. Late fees can’t exceed $25 (or $35 if you’ve been late previously within the past six months), but when you’re a college student with limited funds, $25 is a lot of money to send to a credit card issuer on top of your regular minimum payment.

If you miss your payment by a couple of days, make it as soon as possible. When your payment gets more than 30 days late, the late notice goes on your credit report and can impact your credit score. Your credit report is a document that includes all your credit payments habits and your credit score is a numeric evaluation of your credit report. Businesses like creditors, lenders, insurance companies, utility companies, and apartment landlords use your score to make decisions about you. When you miss credit card payments, your credit score drops and these businesses are more likely to turn you down.

Your credit score is based on five factors — your payment history, amount of debt you’re carrying, age of credit history, types of credit you have, and applications for credit. The two biggest things you can do to protect your credit while you’re in college is pay your credit card bills on time every month and keep your balances low — less than 10% of your credit limit is best.

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