Bright Ideas: Tips to Help Students Establish and Maintain Good Credit
Submitted by Mae Dunn-St. Julien, Sandy Holt and Adriana White, USA Funds Services

As they deal with debt from holiday shopping and spring-break adventures, your students already could be on the path to establishing a poor credit history.
The USA Funds® Life Skills® financial-literacy program equips financial-aid administrators with information to help their students avoid unmanageable credit card debt and the risk of a poor credit rating. Before your students accumulate unmanageable credit card balances, share with them the following ways to “tame” credit card debt:

1. Make an effort to pay off the entire balance each month.
2. Stop using your credit cards. When your balance spills over into the next month, you should put away your cards.
3. If you don't have the cash, don't buy it. It doesn’t make sense to charge a sale item with your credit card, only to have to pay it back at 21-percent interest.
4. Beware of instant credit that some department stores are offering. Don’t be tempted. Just say no.
5. Some credit-card companies offer “teaser” interest rates. The rates are very low initially, but within a matter of a few months, you pay high interest rates on any unpaid balance. Be wary of such “deals.” Always read your credit-card statement carefully.
6. When all else fails, cancel your credit cards.

Financial-aid administrators can share with students information that USA Funds ® Life Skills® provides about credit reports. Explain to them that their credit history is a permanent record of every account they have either repaid as agreed or have failed to pay on time. Since they first started buying things on credit, their credit habits have been documented. Emphasize to students that poor credit habits today will stay on their credit record for many years to come.

Just as grade point averages document your students’ academic achievement, their credit scores reflect their management of credit. Higher scores indicate that they are good credit risks and will help ensure that they have access to credit for future purchases like houses or cars. Lower ratings indicate that they are poor credit risks and they may be denied credit or pay higher interest rates on major purchases in the future.

Establishing and losing good credit
Financial-aid administrators also can offer these tips for establishing good credit:

• Pay off revolving credit balances (bank and store credit cards) in full.
• If you can’t pay your balance in full, make at least the minimum payment.
• Pay your bills on time.
• Undercharge. Don't charge as much as your limit allows.

Be sure to discuss some of the ways to lose good credit:

• Making late payments.
• Exceeding the credit limit on your credit cards.
• Writing bad checks.
• Defaulting on a loan.