March 13, 2019

Intro to Adulting: Credit Basics for Grads

In a few months, the newest cohort of bright-eyed recent graduates will enter the workforce and begin "adulting." If you're graduating college this spring, you've probably received a lot of advice about pursuing your passions or finding a job – but probably not about maintaining your credit score.

The main takeaway: your credit matters. Learning how to maintain your credit wisely can put you one step closer to financing major expenses like a car or a home. Your creditworthiness is comprised of two components:

Credit Score: Your credit score is a single number that helps lenders decide how likely you are to repay your debts. Your score ranges from 300 – 850 points and is based on your payment history, amounts owed, new credit, and the types of credit you use. Generally, the higher your credit score the more options will be available to you, including a lower interest rate for those larger purchases in life.

Credit Report: Your credit report is an official record your credit history that includes money you've borrowed, your history of paying it back, and how much open credit is available to you.

Whether you're just starting to build your credit history or are working to improve your credit score, here are four tips to help keep you on the right track.

  1. Build Credit History: Your credit history of one of the largest components of your credit score. Begin by building a strong record of repaying debts. You can start building your history by getting a credit card and opening a checking and savings account. Be sure to make regular payments on your credit card that are on time and in the amounts scheduled. For your bank accounts, be sure to make regular deposits and never bounce checks.
  2. Chip Away at Debts: Debts are calculated into both your credit score and credit report. If you're a recent graduate, it's likely that you have some sort of student loan debt. In fact, 59% of bachelor's degree recipients in 2016-17 graduated with student loan debt, according to the CollegeBoard. You can build a positive credit history by making your student loan payments on time.
  3. Use Credit Responsibly: The best way to do this is by spending within your means. Although credit cards are convenient and easy to use, spending recklessly can hurt your credit. Paying off your balances in full and on time each month can help you build excellent credit.
  4. Know Your Report: It is your responsibility to monitor your credit and keep it in good shape. You should check your credit report at least once a year, make sure all the information on the report is accurate, and fix discrepancies as soon as you catch them.

To learn more about credit, check out our free CreditSmart® financial education program.

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