Majoring in Good Credit: Teaching Credit Card Smarts to College Students

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Parents need to have several important conversations with college-bound kids, from personal safety on campus to reminding them about eating right. One talk many parents overlook is the importance of managing credit while in college, and how credit use while in school can affect a student’s financial well-being after graduation.

Some parents who skip the talk may assume their children learned about personal finance and credit in high school. But in 2014, only 19 states required high school students to take a course in personal finance, according to the Council for Economic Education. It’s important parents bring credit education home, before their children begin using credit in college.

Here are some talking points to get you started:

1. How Youth Affects Credit

Being young is both an advantage and disadvantage when it comes to credit management. On one hand, the typical college student starts out with a credit report that’s a blank slate – meaning he or she has the opportunity to begin establishing a good credit history. Good credit habits will show up on their report, making it easier to improve their credit scores over time. Conversely, because they have little to no credit history, it may be difficult for college kids to secure needed credit at favorable rates and terms.

2. How Credit Card Use Can Affect Your Credit Scores

Decades ago, credit card companies could enroll students by marketing on college campuses. Unfortunately, students gaining first-time access to credit didn’t always have the education and experience they needed to make good credit decisions. The Credit CARD Act of 2009 prohibited credit card issuers from marketing on college campuses, but a credit card for college students isn’t necessarily a bad idea. Smart credit card use – making small purchases and paying them off right away – can help students establish a positive credit history. Help your college student understand that good credit card behaviors count in his favor, and that bad ones – such as running up a high credit card balance – can negatively affect his credit.

3. When You Should Use Credit Cards, and When You Shouldn’t

Sometimes, using a credit card is to your advantage. For example, when making online purchases or buying big-ticket items, using a credit card adds an extra layer of protection. However, students shouldn’t use credit cards for everyday purchases like a cup of coffee and pizza, nor should they use the card if they know they won’t be able to pay off the entire balance when the statement arrives. It’s smart to use credit cards wisely when you’re trying to establish a credit history, but not so good if you already have significant debt on your credit report.

4. Think of a Credit Score Like Your GPA.

Achieving a good grade-point average takes time; you have to start in your freshman year and consistently get good grades to build up your GPA. Your credit scores work in much the same way. You need to invest time and effort into working toward good credit scores by practicing smart credit use – and especially good credit card habits – throughout your college years. And just as your great final GPA will look impressive to potential employers when you job-hunt after graduation, good credit scores will reflect favorably on your creditworthiness after graduation, when you apply for your first auto loan or mortgage.