Credit Repair Could Be Needed If You Exceed Your Back-to-School Spending Budget

We're now into the beginning of August and that means that many people, whether they're buying for themselves for another year of college or for their children from elementary to high school, are hitting the stores for their back-to-school shopping needs once again. However, when college kids in particular are concerned, these can come with massive costs that can be difficult to bear, and may in turn land them in some amount of credit trouble.

The average college student will pay close to $837 this year on back-to-school shopping, according to new data from the National Retail Federation. And while that's down from slightly more than $907 last year, it's still a large amount.

"While spending on college is down from last year, it is still higher than what we saw in 2011, indicating that parents this year are simply purchasing only what their college-age children need," said NRF president and CEO Matthew Shay. "The back-to-college market continues to grow, with specialty, discount, department, office supply and even drug stores luring students and their parents with attractive deals on everything from microwavable food products to personal care items and of course, home furnishings."

If you're in college and have to meet some of your own expenses in addition to whatever assistance you receive from others, you probably know all too well just how expensive life can get at the start of every new semester. Even beyond the traditional school supplies like notebooks, pens, pencils, and other items, you'll also likely face price tags totaling hundreds of dollars or more for all of your textbooks, in addition to the room and board you'll have to pay to your institution of higher learning. All these costs can certainly add up quickly, and if you don't have the cash on hand — and your student loans won't cover everything — you might end up digging into your wallet for your credit cards to help you buy everything you need to be successful in all your classes. But that behavior can result in potentially massive problems down the road, as well as in your immediate future, particularly if you're not familiar with all the ins and outs of proper credit management.

Why this can pose a problem
At first, putting all your textbook purchases on your credit card might seem like a good idea. You can get the books you need without having to go into pocket right away, allowing you to deal with the costs down the road, when you do have cash on hand. But what many young people who are just dealing with credit cards for the first time might not realize is how quickly the interest charges on those debts can add up in a relatively short period of time, making those books far more expensive, in the end, than even their original price, which was likely high to begin with.

But even beyond the added cost, which could be tough to bear, this decision can also lead to a significantly diminished credit score, and that could be very bad news for any young person who is just starting to develop a borrowing history of their own. For one thing, the second-largest portion of your credit score (30 percent) is made up simply of how much you owe versus your total account limits. So if you have two credit cards with a combined limit of $3,000 — say, $2,000 on one and $1,000 on the other — and you rack up $1,500 in debts on those accounts for textbooks and other costs, you're using 50 percent of what is known as your "credit utilization ratio." Unfortunately, that would be well over the ideal number that would allow you to max out this portion of your score, which is just 30 percent. As such, you'd want to reduce that combined balance to just $900 to make sure your score is as good in this regard as it could be.

In addition, having a higher balance can also increase your monthly payments, which can be difficult for college students to handle because they typically live on smaller incomes. As such, that might put you at risk for falling behind on your payments, and that factor makes up the largest part of your score at 35 percent. The only way to smooth over such a mistake after that is to return to sending in all bills on time and in full, which may be more difficult because of penalty rates and fees that will likely be applied to your account.

Another way to keep credit healthy
Finally, consumers of all ages and backgrounds should also do their best to regularly order copies of their credit reports throughout the year. Doing so may allow them to identify any potentially unfair markings which can drag down their scores. Fortunately, working with a credit repair law firm may help to correct these issues more expediently than you might achieve alone.