Use credit wisely

1) Get a credit card now (if you don't already have one.) The reality is it's often easier to get a credit card while you are a relatively penniless student than when you are a relatively penniless recent graduate!

Once you are out in the working world, you will find that a credit card is indispensable for business travel and, wisely used, it will help you build a credit history that will allow you to get a mortgage, car loan, or business loan in the future.

One of the factors that goes into your credit rating is the length of time you've had credit, so you might as well start the clock running now, if you haven't already. Shop around for a card with no annual fee and other good terms like cash-back rewards.

2) Use it sparingly and pay off balances in full each month within the specified grace period to avoid interest. Interest on credit card balances carried from month to month can quickly grow astronomical. (Even the initial offer stated a low interest rate, those are subject to change over time.) Late fees can often be much larger than interest, so watch out for those as well. Payments over 30 days late also really hurt your credit rating.

3) Treat your credit history as a very important asset. A bad credit history can have a lot of bad consequences:

-- inability to get a car loan, mortgage, or business loan

-- inability to rent an apartment (landlords check credit histories)

-- inability to get certain jobs (employers, especially in the financial industry, check credit histories of prospective employees)

-- higher insurance rates (some insurance companies believe that clients with poor credit histories are more likely to have accidents or otherwise be a bad risk to insure.)

4) Check your credit history for free every four months. The three major national credit reporting companies, Equifax, Experian and TransUnion, have set up a common website that allows you to check your credit history with each of them. Federal law states that you have a right to one free report annually from each company. If you stagger your requests to each of the three companies, that allows you to check your credit record for free every four months. This website explains how to do this.

5) Be careful with personal financial information. If you get unwanted credit card solicitations in the mail, shred them. Don't just toss them in the trash. Someone else might fill them out and send off for a credit card in your name. Be careful with any piece of paper with identifying personal information (e.g., Social Security Numbers, bank account numbers, credit card numbers.) Be especially careful with checks, including those special unsolicited checks sent to you by credit card companies that want you to take cash advances.

6) Beware of "cash advances" on your credit card. They have high upfront fees of several percent, even if you pay off the cash advance right away, within the grace period on your statement. Those cash advance fees on a short-term cash advance paid off within the grace period can easily be equivalent to an annual interest rate of 30% or more.

7) Things you can do to keep a good credit rating:

Pay all bills promptly. (Rent, utility, credit cards, student loans, etc. Not all creditors routinely report, but this can change at any time.)

Use credit sparingly but wisely. If your balances are always zero, you will not build much history. You don't need to run up interest charges to build a history. An occasional purchase (promptly paid off within the grace period) will build a history without running up interest charges.

If you do run into short-term financial difficulties (e.g., due to unreimbursed medical bills or job layoff), contact the creditor before you run into unsolvable problems and negotiate an alternative payment plan. That way the lender will still report you are paying off your obligation "as agreed."