Students’ Poor Money Management Has Long-Term Consequences

Screen Shot 2014-09-22 at 12.59.06 PMStudents’ money management habits can make or break their ability to obtain future credit, according to Connecticut Better Business Bureau.

College provides most young people their first opportunity for financial independence. This is also when many young adults establish habits they will carry with them for the rest of their lives.

Unfortunately, mistakes and flawed decisions can lower a credit score, and make a student appear risky to potential lenders. In turn, a low credit score can make it more difficult to get loans, buy a car or sign up for credit cards and utilities. A bad score can also result in higher interest rates than consumers who have proven their ability to handle money responsibly.

As college students assess their first few months of managing their personal finances, they should take into account four principles to protect their credit worthiness:

Be responsible with credit cards. 
According to a U.S. Public Interest Research Group (USPIRG) survey, two out of three college students say they have a credit card. Freshmen carry an average credit card balance of $1,300. While having a credit card is an important first step to start building a credit history, it is essential to use credit responsibly. This includes having a minimal number of credit cards, paying off the balances every month and keeping a reign on spending.

Pay your bills on time. 
The USPIRG found that more that 40 percent of college students who managed their own credit cards had paid bills late or paid at least one fee or charge for late payment or going over their credit limit. Credit card companies often charge late fees as high as $40, in addition to accrued interest, which can be upwards of 30 percent.

Credit reporting companies and lenders take notice if you are late or miss even one payment. Aside from the immediate benefits of paying bills on time – specifically, reducing needless spending on fees and interest charges – it is an important way for college students to begin building a healthy credit history.

Start saving money now, even if it’s just a small amount every month. 
Developing good saving habits early on will help students reap the benefits throughout his or her life. Starting early means taking advantage of what Albert Einstein described as one of the most powerful forces in the universe: compound interest.

Guard your personal information.   Young adults between the ages of 18 and 24 are one of the groups hit most often by identity theft. An annual survey by Javelin Strategy and Research found that in cases where the victims knew how their ID was stolen, 79 percent of the time it was stolen by someone they had contact with.

Students should shred unnecessary documents that include personal information such as Social Security or bank account numbers, and keep a close watch over credit and debit card statements and checkbooks.

Another essential financial management strategy is to pull your credit reports on a regular basis from the free, government-sanctioned website Your credit score is based on the content of these reports, which are maintained by Experian, Equifax and TransUnion, so look for any unauthorized or unused lines of credit, as well as inaccuracies. If you find an error, report it immediately.

Since you are entitled to a credit report every 12 calendar months, BBB recommends you ask for one report from each of the three credit reporting companies every four months in order to keep an ongoing watch on any suspicious activity. Your credit report can be a first indicator that you are the victim of identity theft.