ABC’s of Building Credit
College Graduates Enter the World of Credit at a Difficult Time

Recent college graduates are undoubtedly anxious to enter the “real world” by starting their career, buying a car or upgrading to a nicer apartment. The reality is that it’s going to take credit to achieve many of their dreams, and if they’ve not established credit while in school, now is the time to start.

“Today’s graduate will be attempting to obtain credit during a time when lenders are taking a very close look at all applicants,” said Amy Parten, GreenPath Education Specialist. “Someone without an established, positive credit history is likely to have a more difficult time establishing credit than he or she would have had a few short years ago.”

If you are a college graduate, GreenPath offers the following ABC’s of establishing and maintaining a positive credit file:

A – Apply for credit sparingly. Applying for too much credit at once can send the wrong signal to the lender, making it appear that you are desperate for credit. Additionally, too many inquiries can have a negative impact on your credit score, and too much plastic in your wallet only increases your temptation to spend. It’s smart to start slowly and move along the credit path at a measured pace.

B – Be aware of how credit works, then work it to your advantage. If you want to secure a home or car loan, you'll need a "thick file," meaning lenders want you to have at least three credit lines. Otherwise, there's not enough of a credit score for them to evaluate you as a credit risk. The scoring model also likes to see different types of credit handled responsibly, so apply for both open-end credit such as credit cards and closed-end credit like car loans where the amount borrowed is repaid in equal monthly payments.

“Many credit applications require banking information,” said Parten. “Having an established checking and savings account is important because lenders want to be able to research your handling of daily finances.”

Parten also reminds graduates that they should show a savings habit and not overdraw on their checking account. Pay your bills on time, and don’t use more than 30 percent of your available credit. Doing these things will earn you a high credit score, which should lead to a low interest rate on your credit cards and loans, making you a winner in the credit game.

C – Consider a co-signer. If you’ve been denied credit based on your own merit, consider asking a parent to co-sign on a loan or credit card with you. This is a risk for the co-signer, as the payment history is reported on his or her credit file, too. Thus, if you fail to make timely payments, both of your credit histories will be negatively impacted. Another option is a secured credit card. With this product, you put up money as collateral for the card and are granted a line of credit in that amount, so the issuer has no risk. By handling this type of credit responsibly, you will be well on your way to building a positive credit record and likely will be able to obtain an unsecured card.

The financial world in which we live requires us to have access to credit. If you’re a college graduate, it’s important to develop good habits as you are learning to manage your finances. The young person who understands the importance of treating his or her credit obligations responsibly today is laying the foundation for a stable financial future.

Do Your Homework before Heading to College

With the high cost of tuition today, many families of college-bound high school seniors wonder how they are going to afford their college education. GreenPath encourages you to do your homework to find creative ways to reduce costs so you can achieve your college dream. Here are some ideas to get you started on the road to discovery: 

1. Take as many Advanced Placement (AP) courses as possible. Encourage your student to take AP courses and prepare well for AP exams. High scores on AP exams can save considerably on college tuition. Many colleges award course credits for them, which can reduce the amount you need to pay in tuition.
2. Pay less for a four-year degree. You can save on costs if the student attends a community college for two years and then transfers to a pricier school for his or her remaining two years. However, be sure that the college to which the student plans to transfer will accept the credits from the community college. 
3. Start researching financial aid possibilities early. Those who plan ahead for the aid process will do much better than those who procrastinate and miss deadlines. To apply for federal student financial aid such as the Pell Grant, student loans, and college work-study, visit http://www.fafsa.ed.gov/. 
4. Research all available scholarships. There are thousands of scholarships available, but the competition can be fierce. Get a jump start on the process by working with your child’s high school guidance office or searching for free scholarship sites on the Internet. 
5. Consider a public school. Your in-state public university offers a great education at subsidized tuition prices. However, private colleges may offer more aid to attract applicants whose families now have more financial need given the state of the economy. 
6. Live at home during college. A large amount of money can be saved on room and board if the student can live at home during the college years.
7. Don’t take on too much student debt. If the student must borrow, be realistic about how much debt the student can incur, given the starting salaries for his or her probable major and career path.
8. If you have to borrow, pursue federal loans first. Avoid having the student take on private loans at all costs.
9. Take advantage of education tax benefits. After all, a dollar you can save on your taxes is worth the same as getting an additional dollar in grant or scholarship aid. Visit www.irs.ustreas.gov to learn more.
10. Refrain from putting tuition on a credit card. If you put large tuition payments on credit and do not immediately pay the amount in full, you will end up spending significantly more money in the long run due to the credit card interest rates.

Excerpts taken from “12 tips on paying for college in tough times, Princeton Review on how to save money, get the most from financial aid,” Money, TODAYshow.com

GreenPath Has Gone “Social”

In an effort to bring quality financial education, news, money saving tips and more to the online community, GreenPath is now on three of the most popular social media sites – Twitter, Facebook and YouTube.

By visiting the GreenPath social media channels, you’ll have the opportunity to: 

• Read the latest news on personal finance; 
• Learn about relevant topics like managing your money, eliminating credit card debt, avoiding foreclosure, the pros and cons of bankruptcy and more; 
• Share your own financial success stories; 
• Read our Frugal Friday feature which highlights practical tips to help you save more money; 
• View GreenPath videos on retirement planning, teaching your kids about money, refinancing your mortgage, protecting yourself from identity theft, and; 
• Find out the latest buzz about GreenPath in the news.

We hope you will join us in the online world! Log on and follow GreenPath today!

www.facebook.com/greenpathdebt  
www.twitter.com/greenpathdebt  
www.youtube.com/greenpathdebt