Surviving Grad School: Credit, why it matters, how to build it, and how to use it

headshot-thalerSMALLGraduate school can be a financially volatile time. Grad students, often living on a low, fixed income, may find that they are required to shoulder unexpected expenses–new computers, travel for research, professional attire, not to mention the cost of relocating to a new area. Many graduate students arrive straight out of university, having never needed to manage a household’s finances. In this situation, credit seems like an appealing solution. If used conservatively, a few reasonable lines of  credit can help the struggling graduate student get the most out of their financial situation. If used carelessly, credit can saddle you with massive debt that will follow you for years after graduate school. As we’ve argued in our previous posts about surviving grad school, beyond student loans, earning an advanced degree shouldn’t put you into debt.

But there is another reason to maintain a few active lines of credit. Your credit score is how banks decide whether or not to give you a loan. If you want to buy a house or a car, most people will need to finance that purchase, and for that you need a decent credit score. Having a good credit score will result in lower interest rates and save you money. Many landlords, especially in big cities, require credit checks just to rent an apartment. Credit can also help you out in an emergency. If the transmission drops out of your truck or you have to make a last minute cross-country trip to visit a sick relative, credit will allow you to pay off that expense over a few months, rather than taking a major hit to your savings all at once.

Relying too heavily on credit, and failing to pay of the bills in a timely manner, will crush you with increasingly growing debt. Learning to manage credit is an important life skill, especially in countries like the United States, where credit is king.

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