Using Credit As a Tool For Your Future
Credit is one of the unsung terrors of becoming an adult. It ranks right up there with getting a mortgage and trying to decide whether or not it’s really illegal to remove the tag off of your mattress. And unfortunately, while people can help you out in this process, you’re the one who will be signing that proverbial dotted line and building your own credit. Mommy and Daddy can’t build your credit for you (though there is a way they can help), but even then, it is your credit, not theirs.
And—like it or not—credit in our world is necessary. Especially if you are taking out student loans for college. Despite the fear that surrounds it for some and what some people may have said about it, it’s really not a bad thing. It’s just a thing.
It’s like a hammer.
A hammer isn’t bad or good, it just is. It’s a tool. You can use it to break your little sister’s ceramic unicorn she spent hours painting or you can use it to battle Loki and save New York. Either way, it’s just a thing—whether it’s used for good or bad depends more on you.
And to use credit for good, you need to understand it so that’s it’s used wisely.
The first step in using it wisely is to understand why we even have a credit score.
Credit? You Mean The Social Media Site?
Close, but, no. That’s Reddit.
So, there are three companies: Experian, TransUnion, and Equifax. These three companies are the largest of the credit reporting agencies in the free world and the only ones that really matter, anyway.
The way it works is these three companies sit in a dark, smoky penthouse far above all us plebes. They drink a lot and eat too much pizza and ranch dressing and wait for someone to call them up and ask for your credit score. They answer the phone, laugh for a while, then roll a handful of ten-sided dice. If they can see straight, they read out the numbers on the dice, but usually their eyes are too blurry, so they just pull numbers out of the smoky haze.
The truth is much more boring.
Basically, those three big companies make it their job to watch all the credit transactions and see who is being smart with the credit that has been afforded them and who isn’t.
They look at some of the following things:
- What kind of credit do you have?
- What kind of balances do you keep on your lines of credit?
- Do you pay on your loans every time a payment is due?
- If it’s a credit card-type line of credit, do you pay it off every month?
There are some other more nuanced things, but the gist is that they are making sure you have a history of taking out loans (a car loan, credit card purchases, etc.) and that you make good on your loans (pay the loan back when the lender tells you to). In other words, that you have a hammer and that you are saving New York and not traumatizing your little sis.
You Mean I’m Being Graded and I Didn’t Even Know It!?
Kind of, but it’s nothing nefarious. It’s just that there are companies who make sure you are playing by the rules. This allows the people with money to feel comfortable enough with their money to lend it to you so you can do things like, I don’t know, help pay for your education at UAT.
And credit doesn’t have to be mysterious. A quick search will show you several ways to check your credit score right now to see how you’re doing.
Just a few quick notes on that.
The national average for a credit score is 660. If you’re just starting out and you’re above that, good on you. If you’re lower, don’t worry; you can improve.
Also, feel free to check your own score. It used to be that people were afraid to check their own score because they thought the simple act of pulling back the curtain into that smoke-filled penthouse would drop their credit score irreparably. Not so.
Your credit score will only lower if there is a “hard inquiry” into your credit, which is usually only done by someone trying to decide whether or not to grant you a line of credit. And even then, it has more to do with how often people are inquiring about new lines of credit for you.
In other words, if you are constantly applying for credit cards or car loans that could hurt your score. But a routine check? Not so much.
So, go ahead. Check yourself out. No need to fear your own credit, even if it does seem like an out-of-control rhino at times.
Building Credit, Like Taming a Rhino
Towards the beginning of Black Panther, W’Kabi is training this war rhino, which is one of the most incredible things in that movie. Yes, vibranium, the cool suit, everything Chadwick Boseman said/did—all that was awesome. But W’Kabi trained a rhino to fight with him. Incredible.
And at the end of the movie, W’Kabi calls his rhino into combat and they fight against those loyal to T’Challa—and against T’Challa himself. That is until Okoye gets in the way and the rhino stops dead in its tracks.
This is a strange analogy but think about it: building credit is a lot like taming a rhino.
Credit is a powerful thing that can tear up the battlefield against your opponents in life, and while it may seem like a thing that can easily turn on you, if you get in its way and plant yourself without fear, but with knowledge, it will stop for you. It may even give you a kiss.
Then again, building credit is much easier than taming a rhino. Building credit has clearly defined steps, which we’ll look at now:
1: Talk to A Financially Savvy Person You Trust
Do you know someone that is financially literate and would be willing to share their insight around building credit? If you think you'll need to take out student loans for college, this may be a great place to start gaining helpful information. This person’s guidance may not be right for you or where you’re currently at in life, but it’s never harmful to get a perspective from someone you trust.
Often, we can get where we’re wanting to go more efficiently by learning and taking recommendations from others who have done it before us. Maybe you’ll even get some accountability or support from them along the way, too. By asking for their insight at all, you’ll probably flatter them and maybe they’ll even become your credit-building mentor in some way.
2: Get a Job
That’s right, get a job. You can’t get most terms of credit unless you have some sort of income. So, go get a job. If you already have a job, you can skip to the next point. If you don’t, get a job.
Can’t find a job? Here’s a secret most people probably won’t tell you: we live in the greatest country in the world with more opportunities than anywhere else in the world. If you want a job badly enough, you can find one. Will it be making tacos at a drive-thru? Maybe. But it will be income and it will be a start to your journey.
Don’t like the smell of tacos? You can also check out resources like Indeed, Monster, and other job search sites to get ideas or find local jobs as soon as you’re legally able to work. Get on another level and set up a LinkedIn profile to build connections with people and companies while you search local listings. Maybe you’ll connect with an engineering firm or marketing agency you can get your foot in the door with that also happens to need part-time, flexible help for basic tasks.
3: Consider a Credit Card
So, you’ve got a job, money rolling in, and now you’re ready for a credit card. Slow down, compadre. Just because you’ve been shoveling rhino dung on the weekends doesn’t mean you’re ready to train your own battle rhino.
Take a beat and evaluate yourself before the credit reporting agencies do. Ask yourself, what am I doing with my money? How much am I spending? How much am I saving? How much am I giving to those in need? In other words, how responsible am I with my money? Because if you haven’t learned to be responsible with your own money, how do you think things will turn out for you once you get your hands on other people’s money?
If you are being responsible and using wise spending habits, you know, like creating a budget for yourself and sticking to it, then it’s probably time to consider a credit card.
4: Pick a Secured Credit Card
This part is fun. There are a lot of great credit cards out there that offer free stuff. Now, the free stuff is meant to get you to use your card more and more, but this isn’t a problem for you because you are super responsible. Otherwise, you wouldn’t be looking at a credit card, right?
One of the cool things that credit cards have started giving away is—money. Yep, cashback. You spend, you pay off the balance, they give you cash. This is a great plan as long as you pay off your balance each month and only pay for something if you have cash in the bank. And it will allow you to get that cold hard cash so you can buy some extra ramen come Christmas time.
But there are plenty of giveaways. Frequent flyer miles, discounts at Costco. You name it, there is probably a rewards card for it. Also, consider looking at student credit cards that you would likely qualify for and are designed for credit beginners like yourself!
5: And/Or, Become an Authorized Credit Card User
This is a tricky one because it requires a supreme amount of trust between you and another person.
Basically, they have a credit card and you become an “authorized user” or “co-signer” on their card. This works great if the primary on the card isn’t afraid of the dice-wielding penthouse dwellers and has tamed their own battle rhino, but if they are still in the dung shoveling stage themselves, then find someone else.
But doing this allows your credit to grow, albeit slowly, as you quietly ride the coattails of another.
Again, only do this with someone you trust. Perhaps your parents, grandparents, or a legal guardian.
Fear, In This Case, Is a Good Thing
Look, this is the United States of America. There has never been a better country in all of human history when it comes to helping people be whatever they want to be. Yeah, it has its problems and its checkered past like we all do but come on. You have something here that people literally die for; freedom.
And it’s that freedom that allows you to make smart decisions to build your credit, take out loans responsibly, and earn a degree that is in demand from an innovative, private and accredited university like UAT. Are you afraid of taking out loans? Good! It’s a big deal and it’s okay to be afraid, but fear should never define us.
Instead, stare that charging rhino in the eyes and demand it stop for you. Make it work for you. A degree in Cyber Security, Network Engineering, Business Technology, Game Programming—these things won’t just change your life, they change your family tree. It's worth getting ahead of your future by building a financial base, so you are unstoppable when it comes to achieving your goals.
And finally, talk to the financial aid department at UAT. Brittany, Mike, Braden, Darla—they are all fantastic, experienced financial aid experts who want to see you succeed. They won’t do everything for you, but they’ll certainly guide you along your path by helping you set up a strong financial aid plan for college. They’ll be there for you to help you get started and throughout earning your degree at UAT. Do not be afraid to reach out and accept their help!
Now, go forth, use your resources, and build credit!