Regardless of the college attended, class rank, or major, a credit card score makes no distinction when it comes to tracking credit activity for the rest of your life.  Unlike a degree that is earned by choice, a credit score and report is not. Therefore students should understand how their credit and repayment history and other factors determine future interest rates for a home mortgage, new car loan and refinancing. Their credit report will also be used by insurance agencies and so on, to evaluate dependability, integrity, character that impacts a student’s career opportunities after college.  

The good news is that credit cards are relatively easy to obtain especially for incoming college students. The bad news is the evil that may if you fail to read the terms and conditions for your credit card. Credit card companies know what it takes to target or solicit students through programs tailored to their needs and spending habits. Enticements from free gifts and promotions at student registration, credit cards with school logos to low or teaser rates and so on are ways many credit card companies use to allure students to credit cards that may prove to be prohibitively more expensive in terms of the overall cost of credit. 

The Basics:
Interest Rates and Late Payments 
Credit cards are not free if you do not pay your bills on time. This means that a credit card company can charge a flat dollar late fee (usually $20 to $40 and more) and interest at a default rate (15 percent to 25 percent or more) going back to your first purchase date.  

Assuming a store reduced a pair of designer jeans from $75 to $50. The student uses their credit card with 0 percent teaser interest rate but does not pay their credit card bill on time. Consequently, the credit card company charges a $39 late fee and let’s say $5 interest making the cost of those sale jeans $94 ($50 and $44 versus $50). Another person making the same purchase and paying their bill on time got a bargain and took a further step towards building a positive credit history. 

Credit Cards
Students needing credit cards would be best off by working with their parents or other adult that has established   credit. Set up a chart to compare each teaser (very low rate) rate that won’t last long, the billing cycle, grace periods, late fees, how default interest rates are determined and calculated if you do not pay on time, methods of payments to pay on line and associated fees and credit limits and increases. In this way, the student will be able to compare the best deal. Here are some Web sites that can provide further information: www.bankrate.com or www.creditcard.com. 

Credit Limits are the spending limits (the allowance) that can be spent on the credit card. Students without a budget tend to spend more than they can afford. The results are late fees, added interest and a negative statement on their credit cards. They should also realize that they might not be able to use the card again until they pay their bill. That is why it is both dangerous to spend up to the limit.

Assuming a student had a credit card limit of $500 that they reached the last day of the billing cycle, which was Sept. 2. The bill was received on Sept. 8 and due on Sept. 15. That means that the credit card was not available for use from Sept. 3 through Sept. 15 when it was paid. This is when students apply for another credit card, as this same scenario will only compound the problem and their credit score. 

Billing Cycles and Payments 
Billing cycles are the dates of the purchases made for the current credit card statement. Grace periods (time from the billing statement to the payment due date) are the time period in which the payment should be made. These grace periods can be tight especially for students who are trying to build a credit history. If the student has the money to pay, they should pay it on line to prevent the uncertainty of the mail and when the payment was posted. If they do not have enough to pay the full bill they should pay something to eliminate the late fee and a much higher default interest rate. 

The Credit Report
Beyond a student’s degree is that a credit score (the number) and the detailed credit report. This report is available to every consumer from these and other on-line Web sites: www.AnnualCreditReport.com; www.myfico.com; www.transunion.com; www.equifax.com; and www.experian.com. 

Credit Reporting Agencies
Lenders use 3 primary service providers Equifax, Experian, and Transunion to determine credit worthiness. The scores using different criteria range from   300 (worst) to 850 (best) are used to market their cards, offer rates and criteria for approval. Here are some of the criteria that determine the score: payment history including delinquencies and collections; amount owned in credit card and other debts; number of recently opened credit card accounts; and types of credit the consumer uses. Remember: late payments usually stay on your record for 7 years and 30-day delinquency can affect your credit for 1 year. 

Credit Card Management 
• Ignore free and pre-approved credit card solicitations that may be more costly than you think. Most of these cards are aimed at students that may not be able to make timely payments.
• Review the college budget on your award letter based on necessities and avoid nice to haves. Be sure to have the money to pay for purchases in full, which will be due within the next month. Treat it as a purchase that you can pay for from the money in your checking account.
• Limit the number of credit cards to two at the most. Be sure to know when the bills are due and the credit limits. Never take cash advances from credit card companies. The fees will be more expensive than you think.
• If you use a credit card, make a small purchase and pay it off quickly to establish positive a high credit score. Establish a payment calendar for ongoing and credit card bills. Pay your bills on line to avoid mailing delays and expensive late fees and interest. Be sure that the payment dates are in line with when you will have the money by arranging to spread your bills evenly over the month. 
• Look for ways to reduce expenses when possible. Seek side jobs such as baby sitting etc used to pay off credit card debt.

Howard Freedman is a financial aid consultant and president of Financial Aid Consulting. His Web site is www.financialaidresults.com