The Grade That Matters Most After College

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When I graduated college, I was super pumped. No more worrying about grades! Wo0o0o! Staying up late finishing a paper and obsessing over getting a certain grade were no longer priorities. So long!

It felt great graduating college and moving on into the world. As a “newly minted” adult, I starting going through the motions of the real world: getting a full-time job, apartment, and dealing with the constant recommendations of people telling me I needed to buy a new car or get a house. Bleh.

As I started going through life after college, an alarming (at least to me) realization popped up. Over. And over. And over. Credit scores and reports. They were important. Who knew? Obviously not me.

The people at Wells Fargo bank knew. Every time I came into the bank during college, they tried to get me to sign up for their cash back  college credit card. I shrugged them off every time. Years of being told credit cards were horrible things kept me away from them. It wasn’t as if anyone had ever discussed the importance of a credit score.

Building credit after college became an afterthought. Then I got denied a cell phone contract, denied apartment lease, and realized I would have to pay deposits on utilities due to my low credit score. The epiphany moment happened quickly afterward. Having a good credit score was important and I needed to get set on improving mine.

The only conversation I remembered having about the importance of good credit was when I was in middle school. My 8th-grade math teacher briefly mentioned how it was a really good thing to have when it came to qualifying for loans and getting lower interest rates.

Being 13-years-old and more concerned with what TV show I was going to watch, the information went through one ear and out the other. Armed with a vague idea of the importance of building credit after college, I set out to get my first credit card.

A week later, I received my new form of plastic in the mail and started charging small things to it: my cell phone bill, gym membership, and subscriptions. The credit card was cash back and every time I reached $25 in rewards, the amount would be deposited into my savings account. Awesome!

I still have that card to this day. A no frills card without much of a rewards program. I keep it because of the $0 annual fee and credit history that comes along with it.

Initially, even with a newly acquired credit card, I still didn’t know what went into a credit score. How exactly could I improve it? Eventually, I stated to learn.

Your credit score breaks down into different categories:

• 35% | payment history (pay your bills on time and sign up for auto-pay)
• 30% | amounts owed
• 15% | length of credit history (why I still keep my first credit card open, generally a longer credit history will increase your score)
• 10% | new credit (opening several new credit cards in short period of time can hurt your score)
• 10% | credit mix  (credit cards, installment loans, mortgage, retail accounts)

When people set out to get their first credit card, it can be overwhelming. Loads of articles all over the internet talk about ways to maximize rewards and travel hacking. That’s all I heard about when I looked into getting a credit card. Fortunately, I was able to find helpful guides.

I have a few tips for someone who is looking to get their first credit card. Because after all, credit cards don’t have to be evil. You don’t have to cut them up and swear them off (thank you Dave Ramsey). They can even, *gasp*, be beneficial.

Don’t focus on rewards too much (yet)

Don’t focus too much on which credit card to get based on the rewards program. The focus when getting your first credit card is to have it for a while in order to build credit history.

Pay in FULL every month

Disregard bad advice like ones that say to carry a balance on your credit card every month. Don’t. If you’re charging something to your credit card, make sure it’s something you can pay off within 30 days. Pay the full amount each and every month.

Try to see if you can set up auto-pay to make sure you make on-time payments every month.

Don’t open up a lot of new credit cards

Focus on just having one credit card for the first several months, especially if you’re starting out by building credit after college.  New credit accounts lower your average account age which have a large affect on your credit score if you don’t have much other credit information.

Get a credit card with no annual fee, know the APR, and hidden fees

Annual fees can suck. They usually are around $59-95 per year. Be aware of credit cards that have an $0 intro annual fee for the first year. You don’t want one at all, at least for your first credit card.

Your credit card’s annual percentage rate (APR) is the amount you are charged on your average daily balance if you don’t pay off your charges in full every month. Understand what your APR is and the difference between the credit card’s introductory APR and the regular APR it will have once the introductory period is over.

Other fees to watch out for: foreign transaction fee (fee, usually around 3%, charged when you make purchases overseas), late payment fee (usually $30-35 and charged when you don’t make at least minimum payment on time).

Keep credit utilization low

When you get your first credit card, you will have a credit limit. Try not to use more than 30% of that credit limit. For example, say you get a credit card and the limit is $1000 a month. Try not to charge more than $300 per month to the card.

Credit utilization makes up 30% of your credit score.

Once you are set to start building credit after college, look at credit card comparison tools and figure out what the best card is for you.

Do you use credit cards? How did you go about getting your first one? 

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Colin // RebelwithaPlan

Colin Ashby is the writer behind Rebel with a Plan, a website dedicated to people who choose to rebel against the norm of living in debt and feeling financially unenlightened. He believes everyone has an eccentric quality to embrace and that lattes are sometimes a necessity (despite what the personal finance community tells you).

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