Successful management of personal finance is like any resolution. One must learn how to take action, resolve to make it happen, find the willpower to persevere, and then turn those actions into almost mindless habits.
If you want examples of how that process works, you can just ask the good folks of The Villages, Florida, Sun City West, Arizona, or Sun City Center, Florida.
The bronzed retirees enjoy pickleball, leisurely golf cart trips to gourmet restaurants, mid-day dips in the pool, and impressive credit scores.
According to WalletHub, these cities have highest-in-country credit scores (insert golf clap) and it's likely because these people have developed rock solid personal finance habits of budgeting, paying bills on time, borrowing wisely, frequently tracking accounts, and protecting themselves against identity theft.
And it comes easy. It's a habit.
Many think that good credit scores have to wait until later in life. On the contrary.
Building a good credit score is something that can be achieved long before retirement and we recommend starting in college (or sooner).
It's known that credit scores seem to suffer early in life (see graphic below). That's likely a product of two things:
Poor financial habits.
Lack of budgeting, poor credit analysis, and missing payments is simply a matter of bad habits. This can be changed if one resolves to be better.
The fact that 35% of a credit score is based on payment history.
Building a score based on a track record of timely payment takes some time. And, if it's true that 63% of people 18-29 don't have a credit card, then how does that relationship begin?
Clearly student loans play a pivotal role in building that credit score and you are likely an expert in helping your students with repayment plan options and default avoidance. Students can do a couple lessor known things to start building a credit score:
1. Ask a landlord to report rent payments to the credit agencies
Making timely rent payments shows that a person can be trusted. Yet, most landlords don't report rent payments to credit agencies, but a renter can request it. RentalKharma.com can help.
2. Switch auto-debit payments to a credit card.
Students who have auto-payments for certain things like cell phone or utilities should make those through a credit card and then have the credit card payment automatically paid through their bank. Payment is the same, but one option builds a stronger credit history.
3. Use 30% of credit limit
Experts agree that credit cards should be used up to just 30% of the credit limit and paid timely every month.
4. Read our Credit Score Handouts
A good credit score opens doors and so does post-secondary education. Is there a better time to start practicing the skills and exercises that lead to a better credit score than during college?
We think not.
So, we've updated our handouts on credit scores. Download and spread the word. We hope you'll find that habit-forming and credit-building skills are the outcome.