by Hannah Pho
In the Life Skills Symposium on Thursday, March 31, in the Ferrari room, Shenandoah graduate Matt Laird explained banking and how to build credit. Laird graduated in 2017 and after graduation worked for United Bank. Laird now works for Atlantic Union Bank.
The Life Skills Symposium is organized by the Office of Alumni & Constituent Relations and gives students the opportunity to learn important “adulting” information.
Laird said the two big things college students should do are build their network and figure out their financial goals. While talking about building a network, Laird said, “You need to seek out and reach out to people who can help you,” because students are not expected to know everything. An effective banker should be a part of a person’s network.
“A good banker is a connector, a salesperson, a counselor, and a community member,” said Laird. Before every financial decision a person makes, the person should decide if it will help them reach their goals.
Laird first explained that a bank is a place to hold a customer’s deposits and to also lend money, such as home loans, car loans, credit cards, unsecured lending, and business loans. Banks make money from the interest rate margin which is the difference between what the bank pays customers to have profit at the bank and the money the bank charges the customer on a loan known as the interest rate.
Interest is directly related to the credit score a person has. Laird said a high credit score would have less interest than a low credit score would when getting a loan. When a student is ready to build their credit, they should sit down with their bank.
“I can guarantee you that a banker will sit down, give you their business card and work through a plan with you,” Laird said.
Laird then explained that credit is a person’s ability to borrow money and is measured by a credit score. “Every big purchase you are going to make in life,” Laird said, “chances are it is not going to be with your own money.” Most people use credit for a house loan, car loan, or student loan. Laird said a credit score proves a person can borrow money responsibly and determines whether or not you can get a loan and how expensive the loan will be. “You are going to have to borrow money for every major purchase of your life,” Laird said.
A credit score is on a scale from 300 to 850, and Laird said in order to not pay high-interest rates or get denied for a loan a person’s credit score should be between 661 and 850. “Think of your credit score as your financial GPA,” Laird said.
A credit score is calculated by payment history, accounts owed, length of credit history, diversified credit, and new credit. Payment history is if a person pays their loan and credit balances on time. The amount owed is a person should only borrow as much money as they need and not spend an excess of money. A longer history of credit gives a person a better chance to prove themselves. There should be different types of loans like auto loans, student loans, and credit cards on a person’s credit report. A lender does not want to see 5 credit cards on a person’s credit report. Lastly, a person should not be opening a new credit card and loans often.
Laird said it is better to keep accounts open even if a person does not use them, as long as it does not cost extra. Keeping it open gives it a longer continuous history, which is better than closing it.
Laird explained the difference between a hard credit check and a soft credit check. A hard credit check can affect your credit score and will only happen when applying for a new line of credit. A soft credit pull does not affect a person’s credit score and can be seen in a banking app or websites such as Credit Karma.
Laird said the easiest way to improve your credit score is to get a credit card because it is the easiest product to get, but it is also easy to get into debt. Laird said to use a credit card but to only use it for things like getting gas and groceries.
“Credit score is the number that rules your life.”