Opinion: Building your credit as a student

2018-10-18T09:49:28+00:00 October 8th, 2018|Opinion|

In the winter of 1999 five Colombians landed in Miami International Airport with only their clothes and $1,000. We came to America like many others, for a better opportunity for our lives, future and education.

That same year we also purchased a Nissan Sentra at 19.99 percent interest. Most people with good credit pay an average of between 4.3 percent to a 4.5 percent for car loans, according to www.Creditdonkey.com. But what is good credit? How do you attain good credit?

On average Americans have a FICO score of 699, according to www.credit.com.  This is a combination of scores from three different credit bureaus: Experian, Equifax and Transunion.  The score can range from 300-850.

I was able to build my credit score when I was 22 years old. How? I needed to rent an apartment and purchase a car like many students. My old car, a silver 2002 Chevy Aveo had an overheated radiator that had begun to cost me more than it was worth.  Like others, I was sucked in by a car salesman at the Volkswagen dealer.

I had a good credit score, 711, but was still advised to lease a vehicle because my credit history was not well established. Specifically, I didn’t have enough open lines of credit.

So, what does this all mean if you have good credit and still can’t purchase a vehicle at a low interest rate? Anyone who does not have at least two years of credit history is considered to be a higher risk. This determines what rate you will receive when trying to finance a vehicle.

Most companies use the FICO score to analyze payment history and potential risks.

My advice, once you are of legal age to obtain credit, is get some from your bank. In Florida the legal age to obtain credit is 18 years old.

But this doesn’t mean that once you obtain a credit card that you can “shop until you drop.” The purpose of having a credit card from a bank is so that you can use it in case of an emergency as well as any purchases you can pay off at the end of the month. Many credit cards typically offer a zero percent interest rate for 12 months. After that the interest rate ranges up to a 29.99 percent depending on the company. So it is in your best interest to pay the balance in full so you don’t accrue interest.

Many retail stores begin tempting teenagers with credit cards offers once they turn 18. For example, Macy’s tries every Christmas to get people to sign up for their credit card by offering a ten percent discount on the first purchase made with the card.

Retail stores make a profit from the interest that you accumulate when you don’t pay of the credit card in full. Though, you open a new credit card and generate a revolving credit score, you can only use this card in the department store.

Instead of a retail store, your first credit card should be with your bank where you maintain a checking or savings account. Even if you are a student, you can use income obtained from scholarships, work study, or income that your family members give to you as an allowance.