Mistake #1: Not realizing that you’ll have a life-long “report card” called a credit report. You know the drill: Your performance in school is evaluated and graded. No secret there.

But did you know that throughout your adult life you’ll be graded in another area altogether, one that has nothing to do with exams, term papers, and homework assignments? It has to do with how well you manage money or, more specifically, how well you manage money that you borrow. Three major credit reporting agencies compile data on you and maintain it in a credit report. And you get evaluated. Just like in school. 

Your Money Management “Grade”
Your money management grade is called a credit score. It’s often referred to as a FICO^® score (since many credit bureaus calculate scores using the software developed by Fair Isaac and Company), although each of the credit bureaus has its own name for it. The scale ranges from 300 to 850, and the higher your score…the better.

Mistake #2: Being clueless about why a good credit score matters…and the ways you can earn “top marks.” Good grades in school can open doors (like to the college of your choice). A good credit score opens up possibilities, too.

• A really bad score can keep you from getting the loan you want. You’ll probably need to borrow money for a car or, eventually, a home. You’ll need an acceptable score for that to happen.
• If your score is mediocre (so-so, like a “C”), you’ll probably be able to borrow money but will have to pay more in interest. That’s because you’re more of a “risk” (meaning you might not pay them back!), so lenders will charge you more to make up for it.
• And finally, just like poor grades can keep you from getting into your first-choice college, a poor credit score can hurt your chances of landing a job or even getting an apartment. Because, yes, employers and landlords can (and often do) check your credit score.

Mistake #3: Not understanding the difference between what you NEED and what you WANT. It’s never too early to learn to first buy the things you need and then, and only then (and only if can you afford it), you buy the things you’d love to have. 

Becoming aware.
Before you’re able to change any bad habits, you have to be aware of them. As you fill in your budget info, ask yourself whether the item was something you really needed (e.g., lunch at the cafeteria) or wanted (a new digital camera). A pattern should emerge, and you’ll see how much money you spend on “optional” items. If you have the money to afford them, fine. If not, you’ve got to make smart choices: Needs first. Then wants. Do that, and you’ll be ahead of some 40-year-olds we know…and well on the way to solid financial footing!

Mistake #4: Not knowing how much money you have to spend…or how you spend it. It sounds simple enough, doesn’t it? Don’t spend more than you can afford, and you won’t run into money problems. End of story. But it’s often easier said than done. That’s why, especially during your college years when your income will be modest, you need to develop…and stick with…a budget. 

Budget: It’s not a dirty word.
Think of your budget as a personal spending plan. It’s simply a way for you to understand where your money goes and to make sure you don’t absent-mindedly buy things you don’t really need. That way, you will have the money for a concert or club or a restaurant. It’s all in the planning.