Establishing good credit is difficult, but establishing bad credit is easy. Estherville Lincoln Central seniors learned Wednesday how important credit is to their future.
So you're a high-school senior and you've just received a letter in the mail offering you a credit card. All you need to do is fill out a simple form and send in the application and pretty soon you'll have all kinds of money to buy the things you want.
Well, not really.
Ron Menendez, assistant vice president/IT manager at Bank Plus of Estherville, told Estherville Lincoln Central seniors about some of the pitfalls and opportunities of establishing a good credit rating Wednesday at the high-school media center.
"You will get credit cards offers and enticements," Menendez said. "They want you to be their customer."
But watch out.
"It could be bad for you," said Menendez, noting that even a few late payments now could mean seven to 10 years of bad credit down the road.
Menendez asked how many of the seniors intended to have vehicle insurance, get a job or go to college. All of them, he said, could be affected by a poor credit rating.
More and more employers look at a job applicant's credit rating as well. When you sign that job application, you're giving authorization to the prospective employer to call up your credit report. And if you've had debt and haven't met your agreement, you may not get a job. Employers look at a credit rating as a determination as to whether an employee is dependable.
"If you have a bad credit score you may not get into a college," Menendez said. "It may affect your financial aid."
Menendez told a story of one couple who had an excellent credit rating. They were offered a credit-based insurance premium. They agreed. The only problem was that the husband had always done business in his name only. So when he passed away and the wife wanted to renew her insurance, she was declined.
About 99 percent of the time, the way to start a credit history is by having someone cosign for you. "They're putting their credit history on the line for you by cosigning for you," Menendez said.
And as one builds a credit history, credit card interest rates are based on a person's credit history. Late payments or exceeding the credit limit can increase that interest rate. And even if you pay off a bad debt, that fact that you were late can stay with you for a long time.
"Just because you paid off doesn't mean it didn't happen," Menendez said.
Most banks look for a minimum credit score of 625-650 for loans and some want a score of 675, Menendez said. A bad credit history when a person is young could quite literally keep a person from owning a home later.
