Can't afford it? Don't charge it!

Thousands of students are in the hole with lousy credit.  What can you do to avoid the modern day debtor's prison?

BY NAJAH JABAR & ALLISON PAPPAS

UF education senior Renee, whose last name is not given to protect her identity, knew she was in trouble when creditors started calling her. At first, it was once a week, but soon the calls came every day.

“I really hate hearing the phone ring,” she says. For Renee, over-using her credit cards got her in trouble with creditors.“I kept using my credit cards for everything, thinking that I would pay them back later,” she says, “but creditors just won’t wait.”

Renee got her first credit card because she needed credit to purchase a new car. Although Renee had good intentions of paying off her debt, she couldn’t keep up with all of her cards.

Unfortunately, many students have the same credit troubles, says Dan Quinn of the Consumer Credit Counseling Service of Mid-Florida. He says students who are receiving financial aid get credit cards to raise their standard of living, and it goes beyond what they can control.

But spending more than you earn can lead to larger problems in the future—obstacles getting loans, mortgages and even a job. Employers are allowed to look at your credit, and even though they are not allowed to use your bad credit as a sole deciding factor, an employer might make a judgment based on your credit history. Bad credit can even prevent you from taking the bar exam, says Jenta Wyatt, credit counselor at the CCCS.

Obtaining credit cards can be tempting and extremely easy, especially in a college town like Gainesville. Many credit card companies target college students through mailing lists purchased at universities.

Credit card companies then send out pre-approved credit card applications to those students.

“Sometimes all the student has to do is merely sign on the line,” Wyatt says. Unfortunately students don’t realize that the interest rates on these cards are extremely high and not worth getting into debt over, she says.

If you subscribe to  magazines, companies can also purchase your information from them.

Learning how to budget your money can save you from imminent debt, Quinn says. It can also save you from embarrassing problems in the future—like filing for bankruptcy.

Bankruptcy is not a pretty sight. Filing for bankruptcy has been defined by Citibank, Corp. as “an inability to pay your debts.” Bankruptcy remedies debt problems, because creditors cannot take away your property and cannot continue to collect money from you. Bankruptcy also has its bad sides. Your name might appear in the newspaper, and it stays on your credit report for seven to 10 years. You may not be able to buy a house or  to get credit cards. It also brings up questions about your responsibility to potential employers.

Sara Wells, a 19-year-old student, has about five credit cards. Although her parents help her pay some of the credit card bills, she works two jobs to pay them off. Dependent on her cards to pay for most of her expenses, Wells pays the balance as the bills come in.

“I don’t buy anything unless I need it,” she says.

Although Wells has learned the art of controlling credit card spending, some of her friends have not.

Wyatt attributes the way students spend their money directly to their parents’ habits. Wyatt believes that everyone learns how to control spending when they are young. Just as you learn values from parents, spending habits are picked up too.

“The mall is a dangerous place for high schoolers to go,” she says, emphasizing that shopping with friends can also lead to credit card nightmares.

If credit cards are necessary, there are ways to keep good credit. The American Express Consumer Affairs Office recommends that if you know you will be late on a payment or can’t make one that month, call the creditors immediately, before the payment becomes overdue. Under legitimate circumstances, you may be able to set up a payment plan.

In order to not get sucked into credit troubles, students need to learn how to manage their money. The CCCS has many pamphlets at the Gainesville office, and counselors are available to help you set up a management plan. They recommend the following guidelines to help get your finances back in shapel
Plan for major and periodic expenses.
Set financial goals.
Know your financial situation.
Compare spending to earnings.
Develop a realistic budget.
Don’t allow expenses to exceed income.
S-A-V-E.
Pay your bills on time.
Distinguish between wants and needs—take care of needs first.
Know what you can comfortably afford to buy on credit.
Keep a record of daily expenditures.

If you think your credit is okay, Wyatt says you should probably get a credit report once a year just to be safe. To get a copy for $8, call 1-888-EXPERIAN or 1-800-EQUIFAX.

Correct credit problems now to avoid a meltdown.