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How to Survive College With No Credit Regrets

Dayana Yochim
August 25, 2010

Bills, budgets, spending temptations, lines of credit -- across the country newly minted co-eds are facing these adult money issues on their own for the very first time. To help kids ace Money 101 -- and avoid graduating with a killer financial hangover (or bankrupting the Bank of Mom and Dad, for that matter) -- here's what they need to know.

Back in the day (as in last year around this time), credit cards were as easy as candy to get on campus. Sorry, kiddos, those card blanche days are over.

Free T-shirts, Frisbees, and unprotected exposure to plastic are gone (or at least harder to come by), thanks to new credit card laws. New provisions from the Credit CARD Act of 2009 keep credit card marketing on campuses at arm's length (or actually, 1,000 feet's lengths).

Trust me, that's good news. Ask just about any grownup about their biggest financial regret from college and the answer will be: "Plastic." (Consider the $45,000 plastic albatross one of my colleagues ran up over the years.)

If you are under the age of credit consent (it's 21) the only way to qualify for a credit card on your own is if you can prove you have the means ("a job" or "a trust fund that spits out a handsome dividend") to pay the bill on your own. Barring that, you'll need an adult co-signer to get a card. (Attention potential adult co-signers: Do not sign the dotted line until you read the warning below.)

What's a credit-strapped kid to do?
Short answer: Use cash (or cash-equivalents like a debit card or pre-paid credit card).

Don't be in such a rush to prove that you're creditworthy. Building credit takes time. Ruining your credit is a piece of cake.

When you're young you don't have any padding in your credit history to smooth over little mistakes. So every action -- every late payment, credit application, maxed-out month -- is amplified. The damage done by a few small slipups now can take years to undo.

We're not just talking about your ability to get plastic in the future, either. Landlords, employers, some insurers, and lenders with whom you want to consolidate your private loans all make business decisions based on what's in your credit file. Consumer reporting agencies and data brokers keep records of everything from your health to your wealth – and a lot more (here's a sample of what they're tracking).

A crummy credit record is like a badmouthing wingman who points out every flaw beneath your charming facade. Good luck shaking him: He's going to stick around for at least seven years to remind everyone who inquires about your bad credit behavior.

All that said, mom and dad may want you to have a plastic safety net for emergencies (e.g. actual "I'm stranded roadside and need to pay for a tow" emergencies, not "awesome sale at Abercrombie!" quote-unquote emergencies). If so, here's how to establish a squeaky-clean credit record.

How to play your first card right
If you do get a credit card (on your own or with a co-signer), don't be a slacker. Treat it like a debit card and pay off that sucker on time every single month. End. Of. Story. Play by the rules now while it's early in the game, and your good behavior serve you well for years to come.

Parents: Don't co-sign away your credit reputation. Are you ready to hand over the keys to your credit reputation to your child? That's what you'll be doing as a co-signer. Remember, if Junior pays the bill late, goes over the limit, or otherwise mismanages that card for which you co-signed, that bad behavior will show up on both of your credit records.

To keep an eye on activity you can re