NEW YORK, June 10, 2002 - With the sounds of Pomp and Circumstance fading into memory, the class of 2002 are packing up their dorms and preparing for the next phase of their lives. Unfortunately, along with earning diplomas, many graduates have acquired a staggering amount of debt, according to the Insurance Information Institute (I.I.I.).
In fact, the average graduate will have accumulated more than $20,000 in student loans and credit card debt, according to Nellie Mae*. In addition, most students will have tripled the number of credit cards they own by graduation.
"How a person manages student loans, credit cards and other debts will effect their lives in a surprising number of ways," says Jeanne M. Salvatore, Vice President, Consumer Affairs, Insurance Information Institute. "Establishing good financial skills and working to build a good credit standing will serve graduates well now and in the future."
Linda Golodner, president, National Consumers League, points out that young people are frequently unaware that an individual's bill paying history will result in a personal credit score based on their credit history. "Many graduates don't think they need to worry about their credit score until they need a mortgage to buy a house, and it can come as a shock when they find out that employers routinely access credit scores as part of the application process."
Having a good credit history, which leads to a good credit score, is generally considered to be the mark of a mature and responsible person, says Salvatore. In fact, graduates will find that their credit may be accessed in the following additional situations:
"An insurance score is different from a credit score," explains Salvatore. "An insurance company uses credit information, together with your driving record and insurance history, to predict whether you are more or less likely to file an auto or homeowners claim," adds Salvatore. "This allows them to provide insurance to more people and to offer it at a lower cost to those who qualify. That can be important to college grads since they are part of a group that generally pays more for auto insurance."
Financial experts suggest that graduates work to build a positive credit history by:
Those who find themselves in a financial bind should consider credit and money counseling. Information is available from the National Foundation of Credit Counseling at www.nfcc.org or the American Center of Credit Education at www.acce.org.
For additional information regarding credit, contact the Consumer Data Industry Association at www.cdiaonline.org or access www.myfico.com to get a copy of your credit score. Those with insurance questions can contact the Insurance Information Institute at www.iii.org or call the National Insurance Consumer Help line at 800-942-4242.
*Nellie Mae - a leading provider of student loans.