College student credit problems are proving to be severe. When one enrolls into an institution of higher learning the natural expectation is that college will be filled with so many rich experiences and the kind of fun, experimental learning that is associated with college. However, since most undergraduates have to apply for loans and pay them off, these aspirations end up suffering premature deaths as lenders start pressing for credit repayments.
FICO, the company that supplies credit bureaus with software programs for the calculation of credit scores, recently revealed that a cycle of indebtedness normally ensues when immature borrowers have several credit cards opened. The long-term consequence of such is that lenders will consider such borrowers as risky, thereby later affecting their ability to secure mortgage loans after graduation.
The President of United Homeowners Association, Jordan Clark – who is based in Washington- reiterated the point that taking advantage of young and enthusiastic borrowers might seem profitable, but on the flipside such easy lending normally incapacitates borrowers and leaves them in the unfortunate position where they cannot secure future credit for more important loans, like mortgage loans. He opened up on several concerns.
Smart Options:
College students are not being exposed to such reckless borrowing by mere chance; there are smarter alternatives to even the best college student credit card than originally thought.
Credit institutions are like cigarette manufacturers:
They only wish to get people hooked when they are still young. This is what Eric Tyson, a personal finance adviser, felt about credit cards and how college students must instead opt for debit cards.
Another useful alternative proposed by finance experts is “smart” cards. These are basically credit cards that have to be recharged with credit whenever someone wants to go shopping. With these parents can decide the amounts they would like to pass on to their college attending children instead of their children going on lavish spending sprees. One notable benefit of these is that a person can actually build excellent credit score rating as this amounts to responsible spending, something that can work in one’s favor when applying for home loans.
Be Frankly Honest:
The only way to advise your children to be smarter spenders is to be frank to them about the negative consequences of recklessness. Here is some good advice for college students as proposed by the experts.
Call a spade a spade:
Explain to your children that credit institutions are only there to rip them off and that if they’re smarter they would realize their inert money-making potential before it’s shattered by unnecessary red tape.
Bear Testimony:
Narrate your personal experiences to them and even go the extra mile of explaining a few of your credit statements in detail, including finance charges, minimum payments and grace periods. This way they’ll see how hard it is to move forward.
911 Credit:
Only allow your children to use their credit cards for emergency purposes only instead of splurging on food, clothes and communication.
Create limits:
Tell your children what will happen when they incur expenses they can’t pay. Lay out the different repercussions on the table.
When college students learn to appreciate the consequences of reckless spending they will be able to avoid future bad credit. They will soon be on track when they realize that starving for a little brings forth plenty in the future.