Tips To Build Credit While In College
One thing that is bound to happen as soon as you turn 21 is credit card companies lining up to offer you a credit card. But theres a catch: you need credit to get credit!
What It Means to Build CreditCredit card companies, banks, lenders and others measure your income against your debt. They also keep track of how timely you are with making payments. Late payments or extreme spending can cause your credit score to go down. You can build credit by paying your bills on time and using your credit card wisely.
Why Building Credit MattersYour credit history tells lenders about your financial history. A good credit score can affect your interest rates on loans and insurance rates. It can also help with getting a job or securing a loan. If you pay all of your bills and expenses with cash, you wont have a credit score.
How to Build Credit While Youre in CollegeBuilding a credit score early in life can be a smart move. These are some tips for building your credit score:
Become An Authorized User
Having a parent or guardian add you as an on their credit card can be a great way to start building your own credit. As an authorized user, youll have the benefit of your own credit card and access to the primary cardholders credit limit. However, you wont have any legal responsibility to pay off the debt on the credit card. In fact, you dont actually have to use the card at all to reap the benefits of activity on the account towards your credit score.
If you are looking into this option, make sure the credit issuer reports authorized users to credit bureaus as this is not always the case. If authorized users arent reported, you wont see any effect on your credit report.
Pay Off Your Balance Each Month
When you are first building good credit, do your best not to carry a balance on the card. Use the card only for purchases you can afford, and pay off the balance at the end of each month. What if you cant? You are living beyond your means and shouldnt be making those purchases.
A student should only have a credit card if he or she has a job or some sort of income to support this financial tool, Davis says. If you carry a balance, you will owe interest fees.
Why pay a fee if you dont have to?
See related:; Student credit cards: The definitive guide
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Why Worry About Credit
Your credit score has more to do with your life in general than you might think. Sure, your parents probably co-signed for your student loans, but you dont want mom and dad to have to co-sign for you forever, do you?
Besides, avoiding long-term reliance on your parents credit and building a good credit history helps you in other ways. Consider:
- Building a credit history allows you to get credit when you need it, such as when you buy a car or a home.
- Landlords will run credit checks before renting to you to ensure youre financially responsible.
- Potential employers may pull a credit report, using it to gauge your personal responsibility.
- A high credit score will save you money by getting you lower interest rates on the loans you take out.
Use Credit Cards Responsibly
It takes time to build good credit, so starting while youre a college student could help you in the future. Your credit score depends on a few factors, including the age of your accounts and your history of repayment.
You might look for , which typically dont require you to have significant credit history and often dont come with annual fees. Some also offer rewards, such as cash back on your everyday spending.
But again, avoid charging too many transactions to your credit card, or you could end up accruing debt and damaging your credit score instead of boosting it.
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Why Is It Important To Start Building Credit Early
Youre probably thinking, Why in the world do I need to build credit as a teen? Isnt that too early?. You might still be in your parents home, but youll be off to college or moving into your own house before you know it.
Your future self will need a decent credit score and stable credit history for everything from landing a dream job to purchasing a new car or home.
Your credit history can affect things like your:
- Car insurance premiums
- Ability to rent an apartment or home
- Qualification for a credit card or bank account
- Ability to borrow student loans
- Desire to start a business one day
- Required down payments for cars, utilities, cell phone service, etc.
Nearly any bill or financial service will need to know about your credit history in some form. Credit can take a while for anyone to build. Once you graduate high school, youre on the fast track toward your future, youll be busy, and life could quickly get in the way of you focusing on building your credit.
Unfortunately, your 20s and 30s are when you need credit the most! The quicker you jump on board with making it a priority, the better off youll be when it comes time to borrow.
Pay Your Bills On Time And In Full
Payment history accounts for just over a third of your credit score. Credit scorer FICO recommends that you always pay your bills on time to avoid late fees and negative marks on your credit report. While credit cards and loans almost certainly appear on your credit report, other billers, such as utilities and cell phones, sometimes report payment histories too . So paying on time is important for all your bills.
Ideally, pay off the balance in full each month to avoid paying interest charges. But if this isnt possible, be sure to pay at least the minimum amount required every month. And if you can pay a little more than the minimum, it can save you on interest costs in the long run.
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Raise Your Credit Score Today
Building good credit can seem like an uphill battle. You need credit in order to build credit. The way to build a solid credit history is to successfully pay off loan, or accurately manage a credit card. But you are unlikely to be able to secure a loan or a credit card without a solid credit history. It can seem like you are running around in circles without getting anywhere. However, there are ways for college students to build a respectable credit history while still in school, and without going mad in the process.
Use Your Credit Cards Regularly But Wisely
Its crucial to remember to only use your credit cards for what you can afford to pay back, ideally, before the next billing cycle.
If necessary, you can use your cards for essentials, like books, if you make a pact with yourself to pay them off within three months to reduce interest. Always pay more than the minimum payment, which shows creditors that you know the importance of paying off a balance.
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Ways College Students Can Get A Head Start On Building Credit
The college years are a time to build knowledge and experience. And under normal circumstances, just balancing those two goals can feel like a lot to handle. So it might seem like a stretch to add âbuilding creditâ to your college to-do list.;
But if you can start to build credit as a college student, itâs probably worth it. Companies can use your credit to decide whether to offer you a car loan, an apartment, a mortgage and sometimes even a job. And building credit while youâre in school means you wonât be starting from scratch when you graduate. Here are a few ways to start building credit in college.
Find Ways To Earn Extra Spending Money
Even though youre busy with classes and clubs, making time to earn some extra cash could be well worth the effort. If you qualify, try to get a work-study job, whether on or off campus. And if you cant access work-study, look for any part-time jobs for college students that pay well.
You could also boost your income with a less traditional but nonetheless lucrative side hustle.
Pick up a side hustle, suggested MoneyTips CEO Marc Diana. In addition to building a bigger financial buffer, the more experience you can get before graduation, the easier it will be to get a full-time job afterwards.
Some side hustle ideas include driving for a ride-sharing service, selling your crafts on Etsy or posting your skills on Fiverr, Upwork or another freelance marketplace. Consider your skills and interests, and get creative about using your talents to earn some extra cash.
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Ideas For Building Credit As A College Student
College students have several options to build their credit, including becoming an authorized user and making early student loan payments.
Eric RosenbergUpdated May 26, 2021
Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
If youre wondering how to build credit as a college student, youre on the right track. After all, your credit score comes into play everywhere from applying for private student loans to filling out an application to rent an apartment. This is because your credit score allows lenders to get an idea of your entire credit history with just one number .
Should A College Student Get A Credit Card
Getting a credit card while you’re in college is a good idea for a couple of reasons. If you ever shop online, a credit card offers stronger fraud protection than a debit card, limiting your liability to $50. A credit card can be a safety net in case of large, unexpected expenses, such as a costly car repair. Perhaps most important, using a credit card responsibly will help you build a credit history, which is one of the first steps of “adulting.” You’ll need a credit history to rent an apartment or get a loan to buy a car, for instance.
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Consider Whether You Need Student Loans
If you need financial aid to complete your undergraduate degree, you may want to look into federal student loans.
Many students and young people encounter a frustrating credit conundrum: It can be difficult to qualify for the best private loans or credit cards;with little to no credit history. But how does one build a credit history without those loans and credit cards?
One way to start is with a federal student loan. While private student loans may require an established credit history, most federal student loans dont require a credit check. That means you can borrow the money you need to pay for school and;build your credit by paying back those loans responsibly and on time.
Use Student Loans For Education Expenses Only And Pay On Time
Students should view their student loan as a great way to cultivate important habits that will help them build and maintain good credit, Davis says. If you use them correctly, that is.
Sullivan says he sees a lot of young people take out student loans to buy cars and other noneducation items. Manage your loans by only borrowing what you need to go to school that keeps the balance down, Sullivan says. When you get out of school, be prepared to consolidate when appropriate.
Davis and Sullivan agree that the real key to keeping your loans healthy is to make at least the minimum payment every month and do it on time. Davis recommends paying more than the minimum to pay the loan off faster, and emphasizes that payments should be received by the creditor on or before the due date on the statement to keep the account in good standing.
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Deserve Edu Mastercard For Students
Our pick for: No credit history and international students
The Deserve® EDU Mastercard for Students doesnt require applicants to have a co-signer or security deposit, and international students don’t need a Social Security number. That makes it a little easier to get approved even for students with limited credit histories. Plus, it comes with a solid 1% back on all purchases. Read our review.
Consider A Student Credit Card
While you certainly dont want to graduate with student loan debt;and credit card debt, using a student credit card wisely is a great way to quickly build your credit. Having a revolving line of credit, such as a credit card, adds to your account mix and gives you more fuel to feed your rising credit score.
Related:Should My College Student Have a Credit Card?
The keys are to choose the right student credit card for your needs and to make all your payments on time. Know all the details of your credit card, including late fees, balance transfer fees and APR, and stay on top of your billing statements.
You can really give your burgeoning credit score a boost by keeping your credit card balance low or even zero. Use the card for a few purchases throughout the month and pay it off promptly. In this way, you wont pay any interest and youll boost the amounts owed portion of your credit score.
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Get The Right Credit Card For You
Once youre able to qualify for a regular card on your own, its important to remember that not all credit cards are the same, says Clarky Davis, former spokeswoman for CareOne Credit Counseling, a debt relief service provider based in Columbia, Md. and formally known as the Debt Diva.
Before you apply for a credit card, you must do some research to find a card with the most benefits a lower interest rate, no annual fees, reasonable credit limits and clear billing policies, says Davis.
If you think you might carry a balance, go with a no-frills,;low interest credit card. A;reward credit card;may sound cooler, but the higher;annual percentage rate; and possible annual fee wont be worth it.
Sullivan says some students should consider starting out with a retail card. Retail cards come with fewer benefits and lower spending limits, but using this card and paying the bill regularly will build good credit.
Davis says those who cant qualify for a retail card will need a;secured credit card, which is attached to a savings account. However, if you pay the bill responsibly and on time, youll eventually qualify for a regular credit card. That includes;student credit cards, products that are directly aimed at consumers who may lack significant borrowing history.
Retail cards come with fewer benefits and lower spending limits, but using this card and paying the bill regularly will build good credit.
How Many Credit Cards Should A College Student Have
How many credit cards should you have while you’re a college student? One? None? A dozen? There’s no one answer that’s right for every student. Instead, the number of credit cards a student should have depends on their ability to make their payments on time, manage their money and avoid overspending. Here’s a closer look at the factors that college students should consider before applying for credit cards.
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Build Good Financial Habits In College
Building good financial habits can help prepare you to build credit. Especially since certain habits, like spending responsibly and paying bills on time, are key factors in building good credit.
Looking for a first step? Consider setting up a budget. Doing so can help you get a clear picture of how much youâre able to spend each month and where your moneyâs going. The U.S. Department of Education has advice on how students can create a budget.;
Just be aware that sticking with your college budget is just as important as making one. And that learning to manage your money is a useful skill, no matter what. Plus, it can also help prepare you for the responsibility of having a credit card.
Explore Whether a Credit Card Is Right for You
The Federal Trade Commission says the best way to start building credit is with a credit card. But that doesnât necessarily mean itâs the right choice for everyone. Credit can be built with a credit card when you use it responsibly. That means doing things like making monthly payments on time.
But there are other factors to consider, too. For example, using a credit card irresponsibly could have long-term negative consequences for your credit. And that could end up affecting other parts of your life.
Ask About Being an Authorized User
And if you don’t think youâre ready for a credit card, there are other methods to establish credit, too.