Students: Your good credit scores



Before the economic crash of 2008, predatory lending ran wild, targeting millions of Americans with high-interest loans, credit cards and mortgages they could easily obtain but couldn\’t afford to repay. The Daily Kos describes how banks preyed on victims unable to keep afloat with aggressive payments or adjust to the fine print, and while most of these accounts were mortgages, credit cards also played a major role—especially those targeted at college students.

After the crash, lenders backed off from predatory tactics, but credit cards still flood college campuses looking for students to enroll for any and all credit cards possible.

Why Students?

Besides the stereotype that college students have poor and reckless spending habits, many teens actually leave high school with fairly good credit. They don\’t have a history of credit card abuse (since they don\’t use credit cards before 18 years old). The lack of credit history doesn\’t necessarily have a positive effect on credit scores, but student loans often boost scores because they\’re considered installment loans, like mortgages and car payments. Installment loans, if payed on time, boost credit while credit card debt often hurts a person\’s credit. Because credit card companies can safely assume a college undergrad is roaming campus with a good credit score, they are prime targets for enticing offers.

The Other Factors

The credit score is not the end all, be all of financial metrics companies consider when they single out demographics for new credit card offers. Yahoo! explains the new trend of consumer scores—a metric that uses factors like credit, health care coverage and education level to create an overall score that companies, and even government bodies, use to assess risk when you apply for a loan, service or even job.

Notice a trend in some of those deciding factors? We already explained how most students enter college with good credit, but they\’re also likely to be covered under their parents\’ health insurance and mark high for education since they\’re already enrolled in some form of higher education. All these factors create good consumer scores, which in turn appeal to creditors.

Keys to Consider

Now that you know why credit card companies target college students, here\’s what to know when it happens to you:

  • You\’re allowed to sign up for a card. If you really have a use for one, but at least choose a card with features that work for college students. This list from Nerd Wallet Finance breaks down the best cards and their benefits for undergrads.
  • Sign-ups are a breeding ground for identity theft. The applications are usually handwritten forms on campus, or entered on iPads using campus Wi-Fi. This is a golden opportunity for thieves to swipe important information leading to identity theft. Protection services like Lifelock monitor this activity to prevent such horrors from coming to fruition.
  • Use a financial tracking service. Use a service like Mint to keep up with your spending so you don\’t fall into a pit of credit card debt so early in life.
  • Remember this very important rule. No credit card is worthy that free slice of pizza.

Author Bio: Carol Howard, Branch manager, financial advisor, baker