10 Keys To Money Management Success*
Excerpted from www.diverseeducation.com
by Howard Freedman
Few students may realize that, regardless of their college or degree, their credit scores will have an even more profound impact on their financial and professional lives. By no means is the credit report kept secret. It only takes a little effort to obtain and review. Though students are introduced to the credit card, borrowing and loan basics, they need ongoing financial literacy programs and mentors to avoid the many missteps that will put them behind the financial eight balls.
It takes time to establish excellent credit scores but waiting until after college is simply too late. Understanding how the process works will not only improve the chances of a lower interest rate but also can impact future employment and financial choices.
Here are 10 ways that can guide students down the right path.
1. Understand your credit score and borrowing costs. For starters, these websites are excellent resources for understanding and building credit:
The Fair Credit Reporting Act guarantees access to an individual's annual free credit report from each of the three nationwide credit reporting companies--Experian, Equifax, and Trans Union. These companies use detailed formulas based on credit history, the amount owed, length of credit history, new credit transactions and FICO credit scores ranging from 300 at worst to 850 at best to measure a student's risk of default.
* www.bankrate.com provides the latest borrowing rates, calculators and resources to evaluate federal and alternative loans.
* http://studentaid.ed.gov offers a wealth of information about college funding, loan repayment options, loan forgiveness, and postponement programs.
2. Students always should take advantage of Stafford loans regardless of their income. These loans are not based on credit scores, do not need to be co-signed by a parent and have more repayment options than any other loan. Even if it is repaid quickly, these loans help the students establish good credit before they graduate. Students also are encouraged to pay off their alternative loans first because of their variable interest rates and shorter repayment cycles.
3. Don't think federal loan consolidation will lower your interest rates. It only makes things easier to repay without having a significant impact on the costs of borrowing.
4 Create a budget to define each expense as a necessity or a "nice to have. Focus on funding the necessities first without having to borrow money to pay for the fun stuff. Without a budget, the student will never know where his financial performance is heading.
5. Coordinate credit card closing and payment dates with available funds, In other words, students should not have to borrow to pay everyday expenses. Statement dates can be negotiated on paid online to minimize risk.
6. Understand credit card basics. Students may not realize that paying a minimum monthly payment only eliminate a late fee but not interest. Despite financial enticements