Crush the myths

This number affects your ability to buy a car, house, or get a loan, as well as the interest rate you will receive to borrow the money. Factors used to help determine your credit score include your payment history, outstanding debt (aim for balances under 30% of your limit), your credit history, and recent inquiries on your credit score – so apply for new credit in moderation. Also, many companies check your credit score as part of their decision to hire you.

Credit score ranges

If you’re worried about not having enough money to pay for school, you’re not alone. Nearly 60 percent of students feel the same way.* According to the federal Consumer Financial Protection Bureau, about 41 million people are borrowing money for their educations with one in four behind on repayments or in default.

The key here is don’t make a large borrowing decision with limited knowledge. Talk to trusted mentors and do your own research to understand the bigger picture of the degree you are obtaining and the salary you expect to earn. Student loans have to be paid back even if you don’t finish your degree, so it’s important to only borrow what is essential to cover costs such as tuition, fees and books. Have a plan to pay back the debt in full and on time (including the extra you’ll pay in interest) since typically six months after you graduate you have to at least start making payments.

High interest rate loans and fees can really stack up, as well as those seemingly small bank charges that cover purchases you really couldn’t afford and not having enough funds in your account. Usually the easiest loans to get are the most expensive, and payday loans fall in that category. Make sure your budget has a spending and saving plan to avoid paying a lot more than you borrowed in the first place.

If you’re already in over your head, it may seem impossible to get back on financial track, but solutions are available. Sometimes, it’s possible to turn things around in weeks or months by paying attention to your statements, asking questions, negotiating balances owed and practicing discipline with a reasonable payoff plan.

The big idea here is that credit and debit cards should be used carefully. Just because you’re approved for a credit card, doesn’t mean it’s a fiscally smart decision. Different cards charge different rates and fees for allowing you to borrow their money, and when you carry a balance you end up paying a lot more for what you charged than if you used cash.

If you do have a credit card and use it responsibly by paying on time and paying off your balance every month, you can build your credit score. Also, it’s important to review your credit card statements and bank accounts regularly – a lot of companies have apps that make it easy to do with a few clicks. Most importantly, don’t spend more than you have. A budget can help make sure you know what your numbers look like.