By Diedra Eby, TRiO SSS Participant
Hughes Federal Credit Union representative Valeria Arnold speaking to students. Photo by Ambur Wilkerson.
On Sept. 24, TRIO held a money management workshop at Pima Community College’s West Campus Student Life Center. Valeria Arnold from Hughes Federal Credit Union was the speaker, giving students a short, but thorough, introduction to credit; what it is, how it works, why it’s important, and how to make it “work for you.” She also explained how Hughes Federal Credit Union, and other credit unions, can help you establish and maintain a health money management plan that includes covering your needs, sparing some money for your wants, and contributing to your savings for future plans and emergencies.
After a brief introduction to credit and an explanation of the basic vocabulary, Arnold recommended staying within 30% of your available credit in order to maintain a good credit rating. Here are the factors that she said affect your credit rating:
- Payment history is 35% of your score. This is determined primarily by whether or not you pay your bills on time. Do you owe a lot of money to a lot of people? It affects your credit score by 30%. The length of your credit history has a 15% affect on your credit. How long have you had each of your accounts? Do you regularly open and close accounts? Arnold recommends keeping accounts open even after you pay them down to a zero balance to lengthen your credit history and provide a strong standing.
- New credit only has a 10% impact, although you do need to consider the fact that every single hard credit inquiry has a negative impact on your credit score (each time a company checks to see if you’re credit worthy). Finally, the types of credit you currently have provide 10% of your score, so you should maintain a healthy mix of credit cards, like secured loans (i.e. a car loan is secured by your loan, a signature loan is unsecured).
An important item to note: Arnold said that even if you pay off all your debt, “it only takes six months for your credit score to drop down to zero,” so it’s important to use some kind of credit, at least occasionally, to keep up your good credit even if you immediately pay it off.
The benefits of using credit:
- Large purchases become possible.
- Your credit score can increase.
- You can earn rewards – cash back, rewards miles, travel bonus, points redeemable at Apple, Amazon, Steam, etc.
The risks of using credit:
- Interest is expensive.
- Credit scores can decrease hard credit checks.
- Closing an account (leave at a 0 balance instead)
Debt is dangerous. If you’re looking for a credit card, be sure to look for one with the lowest interest rate your credit qualifies you for. Your bank or credit union is a good place to start.
Credit unions provide banking services, plus you become a member of the credit union and own a share of the credit union when you open an account. Hughes’ credit cards are currently 9% to 11% interest for qualifying members.
Arnald explained the importance of using the 50/30/20 Rule to handle your money; This is advice often given by the richest people in the world as well. Set aside 50% of your money to cover your needs, 30% for your wants, and put aside 20% in savings for the future and emergencies. This method, Arnold said, allowed her to repair her credit and save for a house.
You can find Hughes Federal Credit Union’s free MoneyCoach at HughesFCU.org/MoneyCoach or MoneyCoach for Students at HughesFCU.org/MoneyCoachForStudents. Input how much money you have and it will instantly tell you how much to put into each category.
At the end of this informative workshop, TRIO and Hughes Federal combined for raffle drawings for both TRIO students and non-TRIO students, including a $25 gift certificate. Pizza, juice, and water were served throughout.