On Nov. 16, Santos Manuel Student Union (SMSU) put on an event titled, “Establish a Credit History & The Wise Use of Credit”. The event was designed to make students aware of how to establish a credit profile wisely and also to address the consequences of credit misuse.
The speaker of the event was Lori Watrous, who is the Education and Community Outreach Coordinator with Springboard Nonprofit at Riverside, CA.
Watrous works with credit.org, which is a non-profit agency established in 1974. Their mission is to improve the lives and financial well-being of individuals and families by providing quality financial education and counseling.
Creating a credit profile is something that some students might view as intimidating. Watrous asked the audience, “Who knows their credit score?” Only a few students’ hands raised, which is not surprising.
Many students are unaware of their credit scores. Some of the reasons for this is that some students might not be fully aware of how important a credit score is for their future so they do not bother looking, while others might be neglecting to check because they are afraid of finding a bad rating. Either way, the event was designed to reach those who wanted to start a credit history but did not know how and for those who wanted to become more aware.
Whether a person wants to buy a car or a house, a person’s credit score will be checked. Watrous discussed how a rating could also be necessary for future career goals.
“Especially if you’re going into management, where you’re going to be handling money, or personal information of other people, you’re going to have to understand that employers are going to be looking at your score,” said Watrous.
A person establishes a credit history by using a credit card, but by using it smartly, which means that they always swipe their card only when they know they can pay it in full. “A lot of people say I don’t want credit cards; there’s no rule saying you have to have credit cards, but if you want to obtain a home loan in future, those lenders are going to need to see your history,” said Watrous.
The best time to use a credit card is for daily expenses that a person needs and knows they can pay off. “I call it the GG card: gas and groceries, which are things you need,” stated Watrous.
One student asked what credit card should she choose, and Watrous replied that the best thing to do is to go to your bank or the Credit Union and to ask if they have a secured credit card. With a secure credit card, you are putting the deposit down which becomes the credit line for that account.
For example, if a person puts down 900 dollars for the account, then they can charge up to 900 dollars. Every month a person should use the card and pay everything in full and after a year of use, a person will most likely see a rise in their credit score and will showcase that they have paid off their bills and are responsible in their spending. Credit Karma is a popular website that people can use to check their credit score.
Another speaker at the event was Jeff Blake, who is Chief Auditor at Citizens Business Bank and talked about how the most important aspect of your FICO score is your payment history. There can be other things that make up your FICO score, but payment history is the largest single percentage which is 35 percent of your FICO score.
“There may be a point in time where all you can do is the minimum payment, but you want to do that versus missing a payment or being late,” said Blake.
Lastly, Watrous said that a person should ask themselves two questions before they purchase something, “Can I pay the entire purchase off in full when I get home?” and “Can I pay the entire purchase in full before the grace period ends which usually means (20-30) days from the billing date?” If you answer no to both these questions, then a person should not swipe that card!