How should MBA students manage, protect and build their credit scores? The first step is education.
With the average debt for MBA hovering over $35,000 and average credit card debt for grad students at $8,500+, newly minted MBAs will need to understand how to manage their finances once they enter the workforce.
Unlike some other graduate programs, most MBA students worked before graduate school and had ample time to build up their credit scores. Plus, their debt load tends to be less than most other graduate programs — uh, probably because it’s shorter than most. They should know that private student loans impact their credit score in that they may open a credit inquiry.
MBAs probably understand that they should pay off debts in the order of highest rate loans first. I didn’t need Finance 101 to get this. From a pure financial perspective this makes sense. But, MBAs should consider that the order of paying off debts might vary if their goal is increasing their credit scores. Furthermore, I’ll conjecture that a high credit score might secure a better rate on a loan and that would save more money than the high rate card payoff strategy.
In general, student loans should be paid on time and you should put any extra funds towards credit cards first, then to other installment loans like car loans and finally to student loans.
As many MBAs in my program were non-US citizens, I want to point out my episode on building credit for expats.
How are credit scores impacted by law school debt? What can someone expect in a credit score after graduating from law school?
There’s no proof that people who graduate from law school have higher or lower credit scores than the national average. While a law degree means lots of debt in most cases, students may have high paying starting salaries. This post is intended to help law students make sure they send their credit in the right direction.
The best time to start managing your credit score is before you start law school and before you start shopping for student loans.
Graduates in 2006 of public and private law schools had borrowed an average of $54,509 and $83,181, up 17% and 18.6%, respectively, from the amount borrowed by 2002 graduates, according to the American Bar Association. Net net, law schools usually mean lots of debt.
Law school loans will appear as installment loans on your credit file. You have two types of accounts on your credit file. Revolving accounts are credit cards and installment accounts which include home loans, car loans, personal loans and all types of student loans. Paying them off on time, or ahead of time will benefit your credit score the most.
Which should you pay off first? With more and more students graduating with credit card debt, this is an important question. Answer: Credit card debt trumps law school loan debt. If you have extra funds, pay off your credit cards first, then your other loans, then your law school and undergrad loans last.
With more of law students starting with work experience, building credit has already started for these folks.
Still for others, who have gone to school straight through or for they may need to get a bank account and consider a secured credit card to get started.