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Always Pay Bills On Time
You can have decent credit without doing everything right all the time. But its nearly impossible to maintain good credit with derogatory marks on your credit report from late payments or delinquent accounts.
Thats why its important to pay your bills on time each month. Setting up automatic payments can help you stay on top of all your accounts and due dates.
Building Credit Through Help Of Parents Or Family
This option is a combination of the other options. Your parents or family can help you build credit in a few ways.
First, they can add you to their lines of credit as an authorized user. This is a much easier way to get access to a credit card, and you will build your own credit when using the card.
Simply use the card wisely, pay it off each month, and your credit score will improve.
Similarly, your family can cosign loans that would otherwise be difficult for you to obtain. This simply means they are guaranteeing youll pay your loan.
By doing this, you can obtain a loan and begin building credit by paying it off. Know that using this option is a risk for the cosigner: they are financially responsible if you dont pay your bills.
Bottom Line: Having your family add you to their credit cards as an authorized user or cosign loans can help build your score without having to open your own cards or get your own loans.
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Recommended Credit Cards For Travel Benefits
Here are some recommended credit cards that can be used to earn and redeem great rewards. As we discussed throughout the article,;using these cards needs to be done very responsibly.
Responsible use;not only protects your credit, which is most important, also protects the investment you are making.
Any interest and fees that you pay due to a balance on any of the cards essentially wipes out any benefits you get! So, using these cards just for the benefits is not worth it if you cant pay them off.
The below links will take you to detailed reviews covering how to;use each;card to earn travel benefits. Make sure you read the Card Math section to see whether getting the cards will be economical for you!
Some cards have annual fees which can make it difficult to get enough value out of at lower spending rates. Try starting with lower or no annual fee cards.
Do Not Apply For Several Credit Cards At One Time
Now that you have credit in your own name, dont go wild. If you apply for too much credit in too short a period of time, your credit score will fall. If you have built up strong credit over several years, it will hurt you less.
But if you have barely established credit and apply for multiple cards, it can lower your credit score significantly, Sullivan says.
One credit card should be enough for most college students, he says. How many cards should you have? To prevent excessive credit card debt, its better for consumers to have as few credit cards as possible. Having just one card is ideal for most students, Davis says.
Now that you have credit in your own name, dont go wild. If you apply for too much credit in too short a period of time, your credit score will fall.
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Mid Penn Bank Can Help You Get Started Building Credit During College
If youre a college student in Central Pennsylvania looking to build credit, Mid Penn Bank can help. We offer ;specifically;designed;for college students who are establishing credit for the first time. Our student cards let you earn points on every purchase, which can you can redeem for cash back or other rewards. To learn more, visit a branch or get in touch with us today.
Disclosures
The material on this site was created for educational purposes. It is not intended to be and should not be treated as legal, tax, investment, accounting, or other professional advice.
Securities and Insurance Products:
NOT A DEPOSIT | NOT FDIC INSURED | NOT BANK GUARANTEED | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE
Limit Your Outstanding Debt
An important factor in credit scoring models is the total amount of debt you have. The less reliant you appear to be on debt, the lower your perceived risk profile and the higher your credit score. While opening new credit offers extends your credit limits and could improve your , keeping your credit card balance low is essential in maintaining a strong credit score.
Tip: Financial professionals often recommend aiming to keep your credit utilization ratio;-;your total debt divided by your available credit;-;below 30%. This factor could make up to 30% of your credit score.
Tip: Automate your credit card and loan payments to ensure you are submitting minimum payments each month. Consider finding the best debt payoff method to bring help your debt down to zero.
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Tips To Increase Your Credit Score
The thing about credit scores is you really start with a low one. While you are young, you hardly have any credit transactions. Most likely, you also do not know how to manage the little credit that you have been using. All of these would result in a lower than the average credit score. For some students, they hardly have any entry in their credit report. A thin credit history will result in a low credit score. And if you do not know how to use credit cards, that might also pull your credit score down.
Fortunately, there are specific tips that you can easily follow to improve your credit score.
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Realize The Effects Of Opening A New Card
Before opening your own credit card, be sure to understand what it will do to your credit. Each time you apply for credit, a hard inquiry is listed on the credit report that were pulled by the lender. This will ding your credit score a few points temporarily. Thus, you want to limit how many cards you apply for at once.
“Ideally, as a young person, you don’t need more than one or two,” Tayne says. “Any more is simply unnecessary.”
Tayne recommends downloading your credit card’s mobile app so you have on-the-go access to review your accounts and set up alerts for when your card is charged.;
Top 7 Ways To Build A Positive Credit History
Back in your parents day, credit card issuers set up booths on the quad and offered T-shirts or free pizzas as sign-up bonuses. College students could start building or destroying their credit the day they moved into the dorms. After many young consumers got into financial trouble with easy credit, Congress in 2009 passed the;federal Credit CARD Act, which prevents lenders from issuing cards to consumers younger than 21 . The law also limits card issuers ability to market on campus. That means building a credit profile takes some extra work. Here are seven strategies for building a positive credit history:
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Protecting Credit By Paying Bills And Utilities
Bills and utilities are a bit of a mixed bag. While your typical utility and household service companies can report your payment history, most do not.
This is simply because it costs them extra money and gives them extra responsibility in reporting and ;maintaining these records.
However, by not;paying these bills, you open yourself to lowering your credit score.;By paying bills on time, you are showing that youre financially trustworthy.
If a utility company happens to report your monthly payments, consider yourself lucky since this will be a positive thing for your credit report!
Bottom Line: ;Bills may not improve your credit score, but they can hurt it if you dont pay them off.
Pay All Your Other Bills On Time
;Think only your credit card affects your credit? Thats how it used to be, says Sullivan, but right now, there are a lot of folks, including;, who are developing alternative credit scores for no-file people, which includes lots of young people. Theyre giving some credibility to utility payments.
In 2018, one of the three major U.S. credit bureaus, Experian, launched Experian Boost. If you grant Experian permission to your bank account, this platform will report mobile phone and utility payments which could give you more control over your credit score.
All three major credit bureaus also collect and list rental payments on credit reports. But this is dependent upon landlords reporting this information, and not all do.
Sullivan says other dues, such as taxes and;library fees, can make a difference, too. He has seen students whose credit has been ruined because they failed to pay a traffic fine. Davis agrees: Paying all your bills;;from apartment rent to your Internet service;;consistently and on;time is essential.
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Building Toward Your Future
The decisions you make in college set the foundation for your post-graduation life, especially when it comes to your finances. Can you start building credit after you graduate? Of course. But you’ll thank yourself if you’ve already established a good credit history and solid credit habits, because the transition will be that much easier. If you’re ready to get started, sign up for Experian’s free service to find the right credit card for you.
Pay Rent Via Credit Card
Speaking of payment history, the more you can have positive payment history reported on your score, the better. Therefore, if youre a renter, use that money leaving your pocket every month to help your score. Ask your landlord if you can pay via credit card.
Just remember to pay the balance in full every month before the end of the billing period. Do not let your rent cost you money in credit card interest. Your best bet would be to pay your rent on the credit card and then immediately make a payment on your credit card for that amount.
Bonus: if your landlord lets you pay via credit card, you can use that to build credit and earn rewards if you have a cash back or travel rewards card.
If your landlord wont accept credit cards, ask if they are signed up with;RentalKharma. This credit-building tool takes into account all of your rent payments so you can improve your credit score with on-time payments.
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Tips For Establishing Credit In College
You have lots of options for building credit in college, both on your own or by joining another person’s credit account to start. Pick the strategy that’s most accessible for you, in terms of the time commitment and any deposit you’ll have to make. Here are some options:
A free tool called Experian Boost can also integrate cellphone and utility bill payments into your Experian credit report, which may improve your FICO® Score. Your credit report at the other credit bureaus won’t be affected. Take advantage of another longer-term credit-building strategy in order to make a bigger impact on your credit history.
How To Improve Your Credit Score During College
With tests, student loans, and plenty of studying, credit scores are often forgotten during college. However, these years are a great time to start working on your score. When you graduate, if your score is strong, it will help you get the things you need, like a car or an apartment. Here are some small things you can be doing to help build and improve your credit score as a student.
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Pay Down Revolving Debt First
Remember amounts owed or credit utilization? This factor focuses on revolving debt, such as credit cards. If you want to do well here, keep those credit card balances as low as possible .
Since youll need to keep your credit utilization ratio at 30 percent or below to do well in this area, focus on paying down revolving debt before installment loans. In the end, revolving debt almost always has a much higher interest rate. Eliminating it first is good for your credit score and your wallet.
Helps You With Living Arrangements
There are two ways that this can be true. First, it can help you find a great unit to rent. Whether it is a condo unit or an apartment, landlords oftentimes look at the credit score of prospective tenants. This allows them to see your payment behavior. The other way it can help is with your mortgage. Eventually, you will think about buying your own house. This involves a really big home loan that you have to pay for a very long time. If you have a good credit score, you can get this loan with the lowest interest rate. This will help you save on the payments.
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Why Should I Care
Here are some of the things a poor credit score can impact:
- Renting a house/flat: The landlord may run a credit check on you to make sure you can afford to pay the rent. If you have a low credit score, they may assume youre a high-risk individual and will be put off renting a property to you.
- Getting a job: Employers may run a credit check before employing you to ensure that you are fit to take on the role.
- Rejection of loans: A poor credit rating might make it harder to get mortgages, personal loans, car loans, credit cards and even some federal student loans.
- Mobile phone contracts: Many providers run credit checks before taking on a new phone customer to ensure that youll be able to pay on time.
- Your insurance premiums: A poor credit rating might mean that insurance customers will charge you a higher premium as you will be perceived as higher risk.
When you apply for any of these, the potential lender will usually check your credit score, and if you have a low credit score, you most likely wont be offered the loan.;
So What Exactly Is A Credit Rating
Imagine you want to take out a credit card. To apply, you go online to your banks website and fill out a few details about yourself and your finances.
Your bank will then check your credit report: a record of your reliability in the past of managing and repaying debt, including loans, credit cards and bills. Your credit report is a detailed record of your credit history, and includes detailed personal information, information about credit accounts and public records.
This report will be used to calculate your overall credit score, along with any additional information you supply. It will show potential lenders how reliable you are with repayments.
The higher the credit score, the lower risk you are to a potential lender, so banks are more likely to offer you loans.;
In other words, if you have a low credit score, you wont get that credit card, because a low credit score = a high financial risk.;
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Here Are Some Of The Ways Your Student Loans Might Affect Your Credit And What You Can Do To Handle Them Responsibly
A student loan, like a car loan or mortgage, operates as an installment loan, meaning that the borrower repays a principal amount, with accumulated interest, over a certain period of time. Unlike a credit card account that someone might keep open for future use, once an installment loan is paid off, the account is closed. Your student loans will affect your debt-to-income ratio the amount of debt you carry compared to your overall income which, if especially high, may affect your ability to obtain new credit.
Your student loan repayment plan becomes part of your payment history, which is the biggest element considered when calculating credit scores. Knowing when your first payment is due is important, but first you need to decide which repayment plan is best for you.
The payment plan you choose will determine your minimum monthly payment, so it is important to understand what you can afford to pay and how your payments will affect your credit. Making on-time payments every month is a positive habit to get into, but if your payments are so low that you are not lowering the original amount you borrowed or so high that you cant make payments on other accounts, it may be time to identify other options.