What advice do you have for students who find themselves with a bad credit score?

Slow and steady wins the race as they say. Be patient and focus on the fundamentals. Start by tracking all expenses and creating a budget. Make minimum payments on all debt accounts each month. As you make regular payments and pay your balances down your credit score will start to improve. Over time, you will see the improvement and your credit score will rise. As a bonus, tracking income and expenses as well as living within a budget will help you develop great habits. You’ll be wealthier and happier over time. 

What should students with bad credit look for in a credit card, and how should they use it?

Start simply; consider getting a card through your credit union or bank. Do not worry about all of the perks at first. Choose something with no annual fee and a low-interest rate. I recommend starting with just food or gas purchases. If you mess up or make a mistake the cost (interest and/or fees) will be minimal. After you have made on-time payments for a few months add in additional expenses. Eventually, after your credit score improves you can get a card with perks (cashback, miles, or points) and enjoy the benefits.

Would you recommend that a student with poor credit open a secured credit card account?

If you have the cash to put down as a deposit and there are no additional fees it’s a fine idea. It’s like having an insurance policy on your card. You can accomplish the same thing by getting a regular credit card through your bank or credit union and putting a few hundred dollars in a savings or money market account. Either way, when establishing credit or repairing a bad credit score, start by using it just a few times each month. Pay it off in full each month to avoid interest and fees. 

A quick tip: I know a few people who record their credit card expenses in their check register (many people still use them, myself included- it is a great habit). At the end of the month, you can compare the expenses to the ones on your statement. You’ll catch any errors and you’ll be a lot less likely to spend money that you don’t have.

Is there any benefit to having bad credit as a student versus later in life?

These days your credit score can impact a lot more than just your ability to get a credit card or borrow money. Your credit score can impact your insurance rates and even your job prospects. I am an advocate for building and always keeping a good credit score. Focus on building good credit when you are young and enjoy the benefits throughout your life. Remember that it takes a while to build your score. Many students find themselves having graduated and looking for a home or another major purchase before they know it! Learn to make the right moves when life is relatively simple (yes, as a student, things are relatively simple). You’ll save a lot of money and decrease your stress level over time.

 

This was originally featured on WalletHub's "Ask The Experts" section. To read the full article, visit https://wallethub.com/credit-cards/bad-credit-student/#expert=Jacob_P._Sybrowsky.