Average student loan debt for the class of 2011 was $26,600, according to the Project on Student Debt at the Institute for College Access & Success. You may also have credit card balances and an automobile loan that all affect your credit record. How you use credit and how much debt you carry will affect many aspects of your life, both financial and personal.
Here’s what recent graduates should know about the impact of credit:
* Your credit score will likely affect your auto insurance rates. If you’ve been insured under your parents’ policy, once you graduate and start your career, you’ll need to get your own coverage. Credit scores are one of the factors auto insurance companies look at when deciding what your premium will be. Although a higher score is no guarantee of a lower premium, a low score may drive your premium up – or even prompt an insurer to deny you coverage.
* Landlords and rental companies will almost certainly want to review your credit before agreeing to rent a home to you. A history of on-time payments and smart credit use can make landlords view you as a good potential renter. Spotty payment history, a high debt load and questionable credit decisions may make you look less desirable. A poor credit history may mean a landlord asks for a larger security deposit from you – or may choose not to rent to you at all.
* When you initiate an account with a utility company such as electric or gas providers, the company will ask to review your credit. Blemishes on your credit report may prompt the utility to ask for a higher security deposit.
* Just like landlords and utility companies, cell phone providers may require a credit check – and a higher deposit if you have poor credit or little or no credit history.
* If you’re considering surgery or a health procedure (such as extensive dental work) that’s not covered by your employer-provided health insurance, you may try to strike a payment deal with the doctor or service provider. A good credit report and score may make the provider more inclined to work with you on a payment plan.
* If you fall in love and plan to get married, it’s unlikely bad credit or high debt will prompt a devoted partner to walk away from your relationship. But studies show that money stress can strain a marriage, and fights over money are a leading cause of divorce. While good credit can’t ensure wedded bliss, starting your marriage with good credit can make many aspects of life easier for you and your spouse.
Understanding how credit affects your financial and personal life is important for everyone, especially recent graduates. Fortunately, online resources like Equifax.com and the Equifax Finance Blog can help you understand credit and how credit reporting and scoring works.