Tag Archives: Nerdwallet

How College Students Can Start Establishing Credit

College is a time for many firsts: living away from home, meeting different people and learning new things. It’s also a time to start setting yourself up for financial success after graduation. Begin by establishing credit.

Why it’s Important
Having good credit helps you rent an apartment, get a loan or mortgage and even get a cell phone plan. Your credit score reflects your credit history. The most common is the Fair Isaac Corp. FICO score, which runs on a scale from 300 to 850, with 850 signifying the best credit.

Student Credit Cards
As paradoxical as it might sound, it takes credit to build credit. Issuers such as Harris County Federal Credit Union understand that students might not have the history it takes to get a credit card. If you earn income, you can apply for a student credit card on your own. If not, you might be able to get one as long as you have a co-signer, such as a parent, to guarantee that the bills will be paid.

With a slew of cards on the market, it’s hard to know which one to choose. An ideal first card has these features:

No annual fee. Some rewards cards charge yearly fees, but there are plenty with no annual fee. As a student, you’re probably strapped for cash, so there’s no need to pay extra charges if you don’t have to.

Getting paid to spend sounds too good to be true, but many student credit cards offer rewards for things students spend a lot on: restaurants, textbooks and entertainment.

Low rate. If you think you’ll carry a balance on your card, look for one that charges a low interest rate. If you know you’ll pay off the balance each month, you won’t have to pay interest, so it’s okay to get a card with a higher rate.

Use it responsibly. Once you have a card, you’re not off the hook yet. You have to use it correctly to build good credit.

Make prompt payments. Payment history is the largest contributing factor in your credit score. So pay at least the minimum by the due date.

Don’t max it out. How much of your available credit you actually use also affects your score. To keep your debt-to-credit ratio low, only use about 30% of your card’s limit. For example, if the limit is $1,000, only charge about $300 at a time.

Keep it open. Even if you aren’t using it, don’t close your account. This helps improve the length of your credit history, which is also considered in calculating your score.

Avoid multiple applications. Applying for a new card triggers a credit inquiry and can lower the average age of your credit accounts. A lot of applications over a short period of time can damage your score.

Diversify your credit. The types of credit you use contribute to 10% of your score. Credit cards, auto and student loans can help diversify your record.

Be patient. Building credit takes time, but if you start as a student and compile a good track record, you’ll be well equipped by the time you graduate.

Teddy Nykiel, NerdWallet

Need a Budget?

You Need a Budget — Here’s How to Make One –
If you’re just winging it financially, that can mean missing out on important opportunities to improve your financial health. Start by learning why you need a budget and how to create one that works.

Why follow a budget?
Budgets have many benefits beyond the obvious one of forcing a close examination of spending habits and determining ways to make improvements. These plans also prepare you for emergencies, comfortable retirement and other financial goals. In addition, budgets prevent you from spending more money than you have so you can avoid excessive debt. All these advantages can add up to the lasting peace of mind that comes with financial stability.

Budget basics
Creating a budget starts with a clear snapshot of your money. Begin by adding up income from salary, investments and other sources. Next total your fixed expenses. These are bills that are about the same each month, such as rent or mortgage, car payments and utilities. Finally add up variable expenses, which may include entertainment, groceries, clothing and incidentals.

Now it’s time to do the math. Subtract expenses from income to see where you stand. If the picture isn’t pretty, examine variable expenses first to see where you can cut back, or try to find ways to increase earnings. You’re then ready to set goals such as saving for a home, vacation or an emergency fund.

Budget tips
To make the most of your new budget:

  • Consider opening a savings account at a financial institution like Harris County Federal Credit Union. Making regular deposits can help you move toward goals.
  • Consider investing in share certificates or opening an individual retirement arrangement, or IRA, to reach long-term objectives.
  • Keep track of cash spending to see where you can cut back.
  • Create goals that are specific, attainable and rewarding.
  • Set specific time frames for reaching each goal.

Budgeting can be much easier these days thanks to free tools that make it possible to manage finances from your smartphone, tablet or other device. Here are just a few of these apps:

  • Mint: Mint can help you categorize and track spending, provide a way to set goals, and view progress using pie and bar graphs drawn from your accounts and transactions.
  • Level Money: Designed for Android- and iOS-powered devices, this app lets you know how much cash is available for the day, the week and the rest of the month, using account links and goals you’ve created.
  • BudgetPulse: Although most of these apps provide secure links, some people just aren’t comfortable plugging personal account information into a networked device. This one offers an alternative by letting users manually import or input banking information rather than requiring a live link. It works with any Internet-capable device and lets you engage your social network to share goals, while facilitating donations from friends via PayPal.

Lastly and perhaps most importantly, remember that you’re human. If you stray from the spending plan, don’t give up. Acknowledge the error and get right back on track. As time goes on, goals that once may have seemed mere possibilities may appear more attainable, and you can begin to consider reaching for even bigger and better things in the days ahead.

Roberta Pescow, NerdWallet