“I do think that every college student should get out and establish credit,” Blair said. “There’s something in the industry called a thin file. A thin file is a person that doesn’t have any credit. Most credit issuers do not want to deal with that person because there’s no credit history to say whether they’re trustworthy or not.”
Establishing credit will help college graduates when they want to buy a car or home, he said.
One credit card is sufficient to develop a credit history. A person’s credit score can be affected if they have too many credit cards that are not being used. Also, most credit cards offer rewards, so it’s better to use one card to maximize them, Blair said.
A person must be 21 to sign up for a credit card, but parents can co-sign to help younger college students establish credit. Being a co-signer allows parents to have an active role in their child’s credit card usage because they will have access to statements. Parents can warn the child that making late payments results in late fees and a possible increase in the interest rate.
“To me, that’s the educational portion that most kids are missing, and that’s why they get into credit problems. The number one problem is that people buy something and believe they can pay it off, and they can’t,” he said.
To avoid falling into the credit trap, students should budget their monthly expenses so they don’t end up using the credit card when they run out of money.
At least 10 percent of a person’s income should go toward paying off debt, including credit cards, auto payments, etc. Credit cards should be used with the goal of paying off the bill every month to avoid interest, he said.
“If you are going to put something on the card that you can’t pay for, my rule of thumb is that you’ve got to be able to pay that off in less than six months,” Blair said. “Anybody that’s putting something on the card that they can’t pay off in less than six months, you’re getting into a challenge because it starts to snowball on you.”
If a person spends $1,000 on a credit card, it would take them 18 years to pay off the balance at an 18 percent interest rate, making only the minimum payment, he said.
Those with credit card debt should stop spending and develop a plan for paying more than the minimum payment.
Today’s issue of The Augusta Chronicle has $2,433.71 in coupons. This includes $17.44 in RedPlum, $344.24 in SmartSource, $30 at Staples, $436.24 in USA Weekend, $543.99 in Parade and $1,010.80 at Harbor Freight Tools.
The RedPlum insert has a coupon to buy an ice cream cone at Baskin Robbins and get one of equal or lesser value for 99 cents. It expires June 30.