When you first graduate from college, if you’re like other graduates these days, you’re loaded with debt and have a low-paying job. This can be a frustrating situation. The temptation for a lot of college students, though, is to go ahead and take out loans to cover all of their early expenses. They live on credit cards, car loans, and personal loans. This can be a dangerous situation, though, even if you think you have a high paying job waiting in the wings.
Basically, what happens when you try to keep up with the Joneses by buying a new home, a new car, new furniture, etc. is that you end up with a huge load of credit card debt and a terrible credit score. Sometimes you can improve the situation as soon as you get a new job, but sometimes you don’t land the promised job and are never able to pay down the debt until it’s a crushing load hanging over your head.
This is why it’s important to start small when you first graduate from college. One of the best credit tips for graduates is to simply avoid using credit cards altogether. Sure, you can sometimes use them wisely by paying them off every month. This can backfire, though, and you can end up with way more debt than you bargained for.
Another good credit tip is for buying a home. It’s okay to go ahead and buy a home if you’re in an area where real estate is likely to appreciate rather than depreciate. Right now, it’s still a buyer’s market. However, your monthly payment on your home should be no more than 25% of your monthly take home pay right now. This doesn’t mean the pay you expect in three years, but what you’re actually making today. If you have to eat Ramen noodles just to make the house payment, you’ve got too much house on your hands.
If you’ve recently graduated and are already in credit trouble, you are in a great position to fix things. Without a lot of the obligations that will come later in life, you can put more effort into getting out of debt. Every month, pay as much as you can on your credit card and student loan bills until you get them paid off. Then, you can start fresh with new knowledge of how to live a financially responsible life.