College Students Beware

What are the two most common pieces of mail that fill up college students’ campus mailboxes across the country?

Or a better question for readers of this blog: What does that have to do with my credit scores?

Well, the first answer — for the luckier, well-loved college students out there, at least — shouldn’t be a surprise — letters from Mom (hopefully jam-packed with endearing words and, more importantly, a fat check).

But college students also receive a plethora of other incoming envelopes: credit card applications. And for most students, a pre-approved credit card proves to be a very tempting offer. However, college students need to be very conservative when it comes to applying for credit cards without a steady income. Recovering from a poor credit past — stemming from a careless approach to credit in college or not — is a difficult challenge. You don’t want to put yourself in a credit hole as a student.

Michelle Felter, a columnist for the Standard Democrat, dives into this topic in great detail in a recent column. As well as the negative aspects of applying for a credit card during college, though, Ms. Felter thinks that there are some positives to students’ establishing a credit history during college. In the article, she states, “Sometimes, however, credit is a good thing to have, especially for students about to graduate and buy items such as vehicles and houses.” But according to Terry Williams, who is the community bank president at Southern Missouri State Bank, students need to be extremely careful throughout the entire process.

More from Ms. Felter:

Taylor Allen, who will begin college at the University of Missouri-Columbia this month, said she has received about two credit card applications a week since early this spring.

Despite the temptations of pre-approved cards, she will not get one before college.

“I had a banking class and the teacher said ‘hold off on the credit card as long as you can,’ and I’ve always remembered that,” Allen said.

She’ll use her debit card. “It’s about the same thing, but you can’t overspend,” Allen said.

Anna Ferrell, marketing director at Focus Bank, said that seems to be a trend. “If the money is not there, you can’t spend it,” she said. “It actually will help you to establish good spending habits and stay within your budget.”

She continues:

Williams compared the significance of a credit score to that of the SAT or ACT score of getting into college. “Your credit score is going to be looked at for the rest of your life,” he said.

There are some tips to follow if you do obtain a card. Justin Taylor, a financial advisor at Edward Jones in Sikeston, said to just open one line of credit, as multiple cards can make someone a credit risk.

Also take a look at the annual percentage rate. “The lower the better,” Wooden said.

Adams suggested using credit cards like a bank account, or just for necessary items. And if one will be making Internet purchases, he advised a card with a limit below $500. “You can have ID theft with those purchases,” he said.

I particularly like Mr. Williams’s analogy (in bold) above — where he compares the importance of establishing a high credit score to achieving exemplary results on standardized college admission tests.

Unfortunately, though, unlike an SAT score, which does little for students — other than something to brag about (if high) — following graduation, a credit score will measure your credit-worthiness for the rest of your entire life, which is why it’s so important to be careful when applying for pre-approved credit cards during college.

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And if you're scoring at home, there's now less than a year (364 days to be exact) to vote in our credit poll. Don't waste another second, vote now!