McRae: Summer Money Series: Establishing Credit

Note: The following article is written and provided by Mississippi State Treasurer David McRae. Any opinions expressed are that of the writer and not necessarily that of this publication.

By Treasurer David McRae

Graduation season is upon us, which means thousands of Mississippi young people are preparing to strike out on their own. With that in mind, I thought it might be a good time to walk through some of the basics of financial wellness. So, over the next month, I’ll be focusing on a few topics many young people struggle with. Up first: Establishing credit.

Before digging in too far, let’s start with a quick primer. In short, good credit means that financial institutions have confidence that you’ll pay your bills on time. When you have good credit, you can often access lower interest rates or more capital if you decide to purchase a car or take out a loan.

Now, I’m aware many students won’t be making loan-worthy purchases right away, but this is the time to start establishing the credit they’ll need once they’re done with school. Rome wasn’t built in a day – and neither is credit.

So, how do you build good credit? Chase Bank offers high schoolers a few recommendations. First, open a checking or savings account (most banks allow this as young as 13 years old).

Second, get a job. Chase Bank explains: “Having a job will show lenders that you have money coming in, which can be used to pay bills and credit cards.”

Third, get a secured credit card. These are great for people who are just starting out and need to build credit. While they often have low spending limits, they are perfect for establishing a history of being a responsible user of credit. If possible, you’ll want to pay off the credit card every month. If you can’t make the full payment, you should pay at least the minimum. A few other credit card tips: 1) Try to avoid having multiple applications out for credit cards, as that can negatively impact your score, 2) Once you have an account open, don’t close it unless you have a reason to, and 3) Be very mindful of credit card debt as it can be a slippery slope.

That said, most experts encourage young people to keep their credit utilization low. Get in the practice of setting a budget and keeping your expenses below your income. Make sure you’re saving extra funds as well to give yourself a cushion for future emergencies or shortfalls.

I hope you found this helpful. Stay tuned throughout the summer for more tips and tricks to get our graduates financially ready for college. For more frequent updates, you can also follow me on Facebook at @DavidMcRae.org or on X at @DavidMcRaeMS.

Mississippi Treasurer David McRae is the 55th Treasurer for the State of Mississippi. In this role, he helps manage the state’s cash flow, oversees College Savings Mississippi, and has returned more than $85 million in unclaimed money to Mississippians. For more information, visit Treasury.MS.gov.