Establishing credit: two baby steps and a warning

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Let’s say you feel ready to handle the responsibility of credit and all that entails.  How do you get started? 

Before we even get into that, let’s take a moment to revisit the main take-away from our last post [Credit: what is it and why should you care?]  Let’s say it all together now: No credit is better than bad credit! 

Yes, we are starting with the warning mentioned in the title.  That is because it is so important!

Moving on.

Demonstrating that you are responsible with your finances is key to qualifying for a loan or credit card… but how can you prove that you are financially responsible with credit when you don’t yet qualify for the very things that help you build that credit?

Baby Step #1: Open a bank account in your name, if you don’t already have one.  Try your best to deposit on a consistent basis. Even if it is only a few dollars a month.  It all ads up, and a history of deposits looks good even if they are small.

Baby Step #2 Apply for a secured credit card.  You use it like a regular credit card, but the spending limit must be backed by a deposit.  (Your spending limit is typically dictated by the amount of your deposit.)  You can use the card to pay bills or make purchases, and you will be responsible for paying off your balance just as you would with a regular credit card.  Another option is to become an authorized on someone else’s credit card.  This means that the other person will need to be able to trust you! (A typical scenario is for a parent to add their child as an authorized user on their card.)  They will be held responsible personally for any bad decisions made with the card, so you will be expected to be on your best behavior!  On the flip side, your name can benefit from the correct usage of that card.

Looking for more baby steps/ways to get started on building your credit?  There are several other valid options, each of which have their own set of pros and cons.  Nerdwallet.com may be helpful to you as you navigate the world of finances and learn what will work best for you.   This page on their website offers several more options for building credit from scratch: https://www.nerdwallet.com/blog/finance/how-to-build-credit/  

Ultimately, your level of responsibility will determine how well they work for you.

What is a good target age for establishing credit?

The decision to use credit or not and when to begin establishing that credit is a subjective one.  Every person has different goals and varying degrees of responsibility.

That being said, you will need to be 18 years of age or order to apply for most credit cards, but can open a bank account when you are much younger (sometimes as young as age 13).

Warning: Building good credit is fairly easily done, and can be accomplished in just a few months.  Bad credit can haunt you for hears.  It is not a bad idea to work toward building good credit while still in high school.   However, your self-control plays a significant role in the success of this plan.  Some students are better off waiting.  Be honest with yourself and seek advice.  Make sure that the temptation to spend is something you can handle.

 

 

 

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Credit: what is it and why should you care?

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Educating yourself on the basics of what credit is and how it affects you is key to making wise economic decisions.

Continue reading

Decoding Financial Aid

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As you begin the process of applying to college, you will notice that college and university financial offices tend to have a vocabulary all their own.  Don’t panic!  It is completely normal and to be expected, so don’t be intimidated and don’t be afraid to speak up and ask for clarification if at any point you feel confused. 

Acronyms in particular tend to be intimidating.  Seeing a string of capital letters popping out at you from the page can make you wonder if you’re actually reading English!  Don’t let it shake you!  Very often, once you know what words the letters represent, the meaning becomes clear without any further explanation.  Think of them as the text abbreviations of the financial aid world.  Most young people recognize acronyms like LOL, TBT, TBH, etc., because these are used often in everyday messaging.  If you take the time to familiarize yourself with a few basic financial acronyms, the mystery of it all will disappear and you’ll feel much more confident when it comes time to discuss your options with your school’s financial advisor.

Three very common acronyms that are used when discussing the financial side of college life are FAFSA, COA, and EFC.  You may have already come across these since they are frequently mentioned during the admission process.

 

FAFSA = Free Application for Federal Student Aid

This is a form that enables you to determine how much financial aid you can receive from the federal government*.  The form can be completed entirely online from the comfort of your own home by visiting fafsa.ed.gov or you can check out their app: myStudentAid. You will need to have some documents handy in order to complete this form – go ahead and view the list here so you know what to expect.

(By the way, any NEW student at TBC who completes and submits their FAFSA by November 1, 2018 is eligible for a $500 scholarship!  If this applies to you – don’t miss out!)

 

COA = Cost of Attendance

Your cost of attendance includes direct education expenses (tuition, fees, etc.) at your college of choice plus estimates for indirect expenses associated with your college education.  Financial aid offices develop COAs by student classification: campus resident students, commuter students, etc.  All students in a certain classification will have the same COA.

Typically, your COA will include:

  • Tuition
  • Miscellaneous fees (registration fee, graduation fee, etc.)
  • Meal plans/food
  • Housing costs
  • Textbooks
  • School supplies (computer, printer, materials for projects, etc)
  • Transportation

 

EFC = Expected Family Contribution

The EFC is a measure of how much the student and his or her family can be expected to contribute toward the student’s COA for a given academic year. Each school’s financial aid office uses your EFC to determine how much financial aid you would receive if you were to attend their school.  Your Federal Student Aid eligibility should be the same at all schools.

If you would like to dig a little deeper into how your EFC is calculated, you can learn more here: https://studentaid.ed.gov/sa/fafsa/next-steps/how-calculated

We hope this helps as you move forward in your college search and application adventure.  We wish you all the best!  Please do not hesitate to contact us at Trinity Baptist College if you have any questions we can help answer.  You can email us at financialaid@tbc.edu or call us at 904-596-2451.

 

*and under which category your eligibility falls: need-based or non-need-based.

What does a budget do? {Or: How to eat churros instead of gas money.}

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Budgeting.  What emotion do you associate with that word?  Boredom?  Fear?  Stress?

It should make you feel secure.  In control.  Confident, even.

There is a misconception floating around that budgets are restrictive.  That they zap all the joy out of life and limit your dreams.  That they make you give up your churro addiction. Continue reading