“Let’s talk about credit, baby. Let’s talk about you and me. Let’s talk about all the good things and the bad things it may bring.”

In case you couldn’t tell from my awesome song only half lifted from a Salt n Pepa track from the 90s, we’re going to talk about credit.

Like most college age Americans, I am somewhat in the dark about the murky world of finance, banks, and credit. So I sought out on a journey through the Internets to try and find an answer.

First off, let us define credit, shall we? When you open a credit card and begin to buy things with it, you are borrowing money from the bank or credit union that you agree to pay back later. Because you are borrowing the money from the institution, they charge you interest on the money you borrow. All you need to do is make sure you are meeting or exceeding the minimum payments of the card.

Sounds easy enough, right? Wrong-o.

Credit cards have the psychological effect of making you feel as if you have “free money.” There isn’t a tangible effect of “losing money” using a card as you would with good ol’ American greenbacks, so many find themselves sinking deeper and deeper into credit card debt because it doesn’t feel like money is being spent.

Unfortunately, because the money that you’re spending isn’t actually yours, every month credit bureaus request the status of your payments – if you’ve been paying everything off in a timely fashion, your credit score goes up, if you haven’t, your score goes down.

This begs the question: What makes up a credit score?

The website MyFico has cranked out some basic information about how your score is determined:

• Payment history - 35%
• Amounts owed - 30%
• Length of credit history - 15%
• New credit - 10%
• Types of credit used - 10%

Why is it important to have a good credit score and report? Because at some point in your life you’ll probably need to take out a loan for a house, car or small business, and most people don’t have tens of thousands of dollars of extra money on hand for that purpose.

The easiest way to build credit right now is to open up a credit card and use it for a singular purchase. Building credit is easiest when you are purchasing things that you would have to buy anyway; for instance, use your card to buy only textbooks or gas.

Because this is an expense that most people incur and budget for anyway, if you are buying and paying at the same rate, you’ll build up credit without risking not being able to pay off the balance.

If you’re in the market for a card and loan with a great, low interest rate ( 0% APR during your time as an undergraduate ) check out an account and loan with TDECU. It’ll change your life. I’m just sayin.

If you have any financial questions, submit them to the Makes Cents portion of the Y&F site, or leave a comment below. You know you want to…!

DeAndre'

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