COLLEGE KIDS AND CREDIT

College is a busy time for young adults. With part-time jobs, research projects, classes and dating most college students are more concerned with their GPAs than their credit scores.  It's pretty easy to make some really dumb mistakes that can harm their all-important credit score which can cost money later on when it's time to get a car loan or mortgage.

In 2010 the landmark federal legislation that overhauled the credit card industry went to college.  The laws began reaching into college campuses to protect students from “unfair or deceptive” practices by issuers.  The legislation proscribes unique protections for the young consumers who are such an attractive market for the card companies.  According to Sallie Mae, about 42 percent of college students have a credit card.

Credit card companies can still market cards on campus but they can no longer offer gimmicks or “come-ons” such as t-shirts, coffee mugs or even concert tickets just for filling out a credit application.  If a student is younger than 21, it is now tougher to get a credit card but it is not impossible.  “If they want to get a credit card, they're still finding ways to get credit cards,” said John Ulzheimer, President of consumer education at SmartCredit.com.

Even with the new laws students can still get into trouble with their credit.  According to Quicken Loans, there are two areas that cause these kids to have lower scores: high balances and credit inquiries.  Most students, and many adults, don't know that just applying for new cards can damage a credit score.

Long before your kid has gotten to college you should have been teaching them about finances and preparing them to be out in the world.  If not, it's never too late.  Students should not think of credit as cash.  They should know the difference between a debit and a credit card.

Parents may turn to the plastic for everything in order to rack up airline miles or other rewards but hopefully you have been careful to explain that you have to have the cash to pay that bill at the end of the month.  Paying the monthly balance in full avoids interest and builds solid credit for the future. Credit cards are not “magic” money.

Credit card abuse and high credit utilization are not the only ways to damage your credit score.  Even students who don't have a credit card can get in trouble.  Many college students who graduate are stunned to find that their credit scores have been hurt by unpaid utility bills.

They all move out of an apartment they rented off campus with friends and no one pays the bill.  The utility bill goes into collection and the student named on the bill take a credit report hit of 50 points or more. It's easy for a bill to go unattended to and go unpaid.  It could even be an honest mistake or misunderstanding but there is still a negative impact.

Send your kids off to college with the knowledge and tools they're going to need to get them through their adult financial life.