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Building and Maintaining Credit

Building and maintaining credit should be important financial goals for college students. On-time bill payment, as well as avoiding bounced checks or overdrafts, will help build a student’s credit. A good credit history will open up financial options to students after they graduate, such as obtaining auto or home loans with favorable interest rates.

Credit reports and credit scores provide students with the capability of monitoring their credit. Your credit report details important information about your employment history, personal information, and credit accounts. Your credit score is comprised of payment history, amount of debt, length of history, number of new credit inquiries, and types of credit accounts. Lenders use your credit score to decide whether to lend you money and what interest rate to charge you. Employers and insurance companies may also check your credit score.

Free credit reports (not credit scores) are available at www.annualcreditreport.com.

Tips for maintaining a good credit score:

  • Contact credit bureaus to correct inaccurate information
  • Pay all bills on time
  • Keep your debt-to-income ratio as low as possible
  • Limit your applications for new credit
  • Keep old credit cards open to maintain a longer credit history

Budgeting

Why should I create a budget?

A budget is a guide that keeps you on the path to reach your financial goals. Budgeting keeps your finances under control, shows when you need to make adjustments to your spending, and helps you decide where your money goes instead of wondering where it all went.

  • Budgeting helps you achieve academic and financial goals
  • Budgeting makes it easier to plan, to save, and to control your expenses
  • Budgeting can help you avoid debt and improve your credit

To create a budget, first list all the categories of your spending: rent, food, phone, personal expenses, entertainment, etc. Then assign an amount to each category. Keep track of your actual expenses for 1-2 months and see how they compare to the amount you listed on your budget. I’m sure you spend more than you realize in certain categories. If you are spending too much in some of these categories, you’ll need to make some changes to your spending. It’s a good idea to revisit your budget once a month to see how you’re doing and make any needed adjustments.

Budgeting Tips

  • Overestimate your expenses
  • Set monthly spending limits
  • Involve your family in the budget planning process
  • Prepare for the unexpected by setting saving goals to build your emergency fund
  • Don’t spend more on your credit card than you can afford to pay in full on a monthly basis
  • Comparison shop

More details and tips on how to create a budget can be found here.

Avoiding Loan Scams

Students have reported receiving phone calls, emails, letters, and/or texts offering them relief from their federal student loans or warning them that student loan forgiveness programs would end soon. Usually, the so-called student loan debt relief companies offering these types of services don’t offer any relief at all. Often they’re just fraudsters who are after your money. There’s nothing a student loan debt relief company can do for you that you can’t do yourself for free.

Here are some signs to help you identify a scam by a student loan debt relief company:

  • They require you to pay up-front or monthly fees for help
  • They promise immediate and total loan forgiveness or cancellation
  • They ask for your FSA ID
  • They ask you to sign and submit a third-party authorization form or a power of attorney
  • They claim that their offer is limited and encourage you to act immediately
  • Their communications contain spelling and grammatical errors

More information on avoiding loan scams is available here.