In the U.S., 17 states require high schools to teach personal finance courses as part of graduation criteria. Ohio is not one of those states. One of the things college students struggle with before, during and after their studies is managing credit.
To remedy this, Jackie Cummings Koski, author of the book “Money Letters 2 My Daughter,” talked to Sinclair students on Oct. 4 specifically about keeping good credit.
Koski is a financial literacy advocate and certified educator in personal finance. She has a bachelor’s degree in communication from Augusta University and was recognized with a congressional commendation by the House of Representatives for her financial literacy efforts.
Throughout the presentation, $2 bills were passed out to audience members that answered Koski’s questions correctly and brought up thoughtful questions of their own.
“When you’re young, it’s so much better to just start out the right way, rather than having messed up and just trying to fix it,” Koski said.
Koski had three major tips for the crowd to start their credit on the right foot.
- Pay your bills on time, every month.
- Pay your bills in full every month if possible. This is done so interest is not accumulated.
- Don’t use more than 30% of your credit limit.
She also spoke of the several fees credit card companies charge and how they can be avoided or waived off completely.
“Credit cards can be absolutely free to you,” Koski said. “But the credit card companies would not be issuing them if they didn’t make money.”
Examples of such charges include foreign transaction, cash advance, over the limit, late payment, balance transfer and annual fees. She encouraged those in attendance to read the terms and conditions to find out how the fees are enforced and what loopholes there are to get around them.
“Where do I get my first credit card; that is the most common question I get from students,” Koski said. “If you’re in school, a student credit card is probably the best place to start. Their requirements are much more relaxed because they are assuming ‘oh this is a student, they’ll graduate, they’ll make more money.’”
Koski also explained what credit scores are and how they work. Credit scores range from 850, which is the best, to 300, the worst. Having a good credit score is essential when trying to get a loan, buy a car or house, obtain a job or rent an apartment.
The only online resource authorized by federal law to receive a free credit report once a year from all three major credit agencies (Equifax, Experian and TransUnion) is annualcreditreport.com.
“There’s a lot of fake places online that want you to think you’re getting a free credit report… you should never have to put in your credit card and you should never have to pay for anything,” Koski said.
The two largest factors that make up a credit score are credit utilization (30%) and payment history (35%).
“Here’s the picture of an 850 credit score person: they would pay every single payment on time, 100% payment,” Koski said. “They are using less than 10% of their available credit. The length of their credit history is 15-20 years, and then they have a great mix. They may have a car loan, several credit cards and a mortgage.”
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Koski also shot down a common myth about scores: checking credit scores anywhere, including apps such as Credit Karma will not lower the score in any way. Insurance companies and prospective employers checking the score does not lower it either.
She encouraged everyone to check their credit scores if they haven’t in a while on apps like Credit Karma or Credit Sesame so they can get started and see if they have any pending issues.