Credit scores: Advice to a college student
Credit scores: If they're high enough, you can get a good credit card. Question No. 2 in this reader mailbag.
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I think, more than anything, this comes down to your parents’ situation and whether they feel they should help you or want to help you or whether they view you as an entity that they have no obligation towards or desire to help. Neither reaction is wrong per se – it really depends on your relationship and their situation.Skip to next paragraph
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Q2: Student credit card question
I’m a college student that has pretty good credit because I have a car loan (although I split the payment with my parents.) I’ve never been late on it, I’ve had it for a little over a year and I’ve checked out my credit report and score and everything and its at least 650-700. I also have student loans out which I know impact my report even though I haven’t started paying them yet. (I’m only a sophomore.) But I know I need to build even more credit and I’d like to get a credit card so I can boost it even more. I’m really only planning on using it for gas and maybe the occasional meal out or normal necessities. I’m thinking about the Discover More card or the Amazon Rewards card. I do plan on paying it off in full every month as well. I just have no idea which to apply for and I’m nervous to even start applying for fear of picking the wrong one or possibly getting denied.
If you’ve checked your credit score, shouldn’t you know exactly what it is? My guess is that you used a FICO estimator rather than actually getting your score.
Anyway, if you’re going to apply for a card, I’d choose one that gives you bonuses based on your normal behavior as it is right now, not based on how you think you might behave in some hypothetical future. If you buy gas at BP, get a BP card. If you do a lot of Amazon shopping, get an Amazon card.
Don’t sweat getting declined – if your credit score really is that high, you’ll be issued a card.
Q3: Dealing with extra income
My wife and I have been living together for about a year and a half now. We moved from the West coast to Omaha after graduating college because of a job I got out here. Since then, we’ve been working hard on building our emergency fund/liquid savings. Between saving and a couple of small windfalls that have come our way, we have saved a little over $20,000 in an ING savings account. Aside from that, I have about $6000 in my 401(k), for which I contribute 5% of my paycheck and receive the full company match.
We have no credit card debt. I have two student loans which I am paying back on a ten year repayment plan. Once has a balance of $14,800 at 6% and the other, 7,200 at 6.1%.
As for other goals, we are planning on taking 9 months to a year off in several years to travel. The plan is to have enough save to do this and still have 10-15,000 left in savings when we come back. We are not entirely sure how much this will cost, but I anticipate we would need at least another 10,000 saved. Aside from that, we want to purchase a home eventually, but that’s likely not going to be for at least ten years (we are both 23).
So, our month to month financial situation is that we spend $500 to $800 less than we earn, depending on the month. Aside from continuing to save for a trip, where else could we put our money? I have toyed with the idea of contributing more to my student loans, opening a Roth IRA for my wife (she is a student and doesn’t have any retirement account set up), or some other type of investing. What would you suggest?
Whenever someone asks a question about what they should do with extra saving or investing dollars, I respond with the same general thing.
Set some goals.