Say No to Store Cards
When you're dropping a few hundred dollars at Macy's or Victoria's Secret, it's as hard to resist a pitch for a department store credit card — 10% discount! Bonus points! — as it is to swear off chocolate on day one of your period. But you must not give in. Thakor points out that store cards have obscenely high interest rates as well as outrageous penalties you risk getting slammed with. Whatever you save on your initial purchase probably won't be worth the extra fees — which automatically are added to your credit report.
Get Rid of Your Plastic Harem
One of the most common mistakes Thakor sees people make is opening up a bunch of cards thinking that it makes them look like a better credit risk. "Two cards max is ideal," she says, "Any more than that, and lenders view you as someone who has the potential to get into a lot of trouble, and they end up lowering your overall limit."
Toss Out Your Newest Cards
However, closing any random card could actually hurt your credit score. "One of the most important factors affecting your credit is the length of your credit history," says Thakor. If you're trying to lighten your wallet, it's best to sacrifice a newer card, so you don't lose all the good credit you've established with a long-time card that reveals your solid financial habits — such as paying bills on time and/or in full.
Be Careful With Student Loans
Educational debt has always been considered okay, the thinking being you'll pay it off with the high-salaried job you land once you get your degree, says Thakor. But here's the tricky part: Any student-loan debt you rack up will stay with you until you've completely paid it off — unlike credit card debt, which you can often negotiate with a lender and pay back fifty cents on the dollar, for example. Thakor advises doing everything you can to minimize college loans from the beginning: Choose a state school over a private school, or do two years at a community college and spend your last two at a four-year university.