10 Tips for Building Credit as a College Student
As a college student, now is the time to start planning for your financial future. Parties, making friends, and good grades are important, but taking care of your finances now and building up your credit can set you up for success. But how can a college student build their credit while still in school?
College students can build their credit by properly managing their finances. This often includes getting a credit card and making payments on time and keeping their limit low. Paying off other bills can help get you ahead and will make life after graduation easier.
Building your credit score up while in college can help put you a step ahead in the game. Let’s look at some of the ways you can do this while still in school.
How Can a Student Improve Credit?
As a college student, it is easy to assume that there is nothing you can do to improve your credit score. You are limited on options because you have no credit history, but how will you ever build credit?
A student can improve their credit by properly using credit cards and paying their bills and any debt on time. These will get reported to the credit bureaus and will raise your score. Staying diligent with this is the best way to get ahead.
Credit cards will be your best bet for improving your credit. Some of the ways you can use credit cards to help include:
- Pay it off each month
- Only use when necessary
- Only have one credit card at a time
- Do not apply for too many credit cards at once.
Paying off the bills and focusing on never being sent to collections will go a long way when you want to improve your credit score.
How Long Does It Take to Build Credit as a Student?
As a college student, you will not be able to build up your credit score overnight. You need to plan ahead and be ready for some hard work in order to get that score up. With some dedication and planning, you will get a good credit score faster than you think.
A college student can expect to establish a credit score within three to six months. The exact steps they take will help determine this. For example, as you make payments on time and show your responsibility with money, that credit score will go up.
There are several mistakes you can make that may prolong the amount of time it takes to build up a good credit score. These include:
- Miss a payment
- Take out too much debt
- Have too many inquiries
A good credit score is going to be imperative to helping your financial future, but you need to avoid the mistakes above to ensure you get the most out of your hard work.
Why Is It Wise to Build Credit as a Student?
As a college student, you are excited to get out into the world and experience all it has to offer. For most, a good credit score is the last thing on their mind. But there are many great reasons to get a head start and create a good credit from the beginning.
Establishing a good credit score while you are still in school can make life easier when you graduate. It helps you to qualify for better rates if you need to refinance your student loans, can make a new lease easier to get, and can help you pass an employment background check.
10 Tips for Building Credit as a College Student
As a college student, you can take a few steps that will help you build up your credit and get ahead of the game by the time that you graduate. Some of the great ways to build up that credit includes:
Become an Authorized User
This method allows you to be on a credit card, even when you do not have the credit to get one yourself. You can piggyback off the good credit from your parents and get all of the benefits. This also reduces your risks while building you’re your score.
To do this, you will need to:
- Ask your parents about being an authorized user
- Have your parents call their credit card company to add you on.
- Spend and pay off the amount on time to boost the score.
It is that simple. This method only works though, if you are responsible with the money and make all of your payments on time. If you can succeed with this, then. You will get ahead with your debt.
Have Your Own Credit Card
Many credit card companies offer introductory cards to college students. They hope that they can get a lifelong customer who will continue to use them, providing lots of profits for the credit card company. As a student, this can be beneficial to you, but only if you utilize it properly.
These credit cards will be a little different compared to traditional ones in that they:
- Have a lower starting limit
- May have a higher interest rate
- May need to have a certain credit score.
Read through all the fine print on the application before choosing this type of credit card. It may seem like a great idea at the time but using it improperly can set you up for failure in the long run.
Choose the Right Credit Card
While a credit card will help open many doors for you and make it easier to get ahead with your credit score, do not just jump in and choose the first card you find. There are many options out there, and you need one that benefits you, not just the credit company.
Do a bit of research on credit cards before picking one. Some of the features you should look at include:
- Clear billing policies
- Lower interest rates
- Reasonable credit limits
- Skip the annual fee
Be careful with the rewards cards. These can be a good deal, but only if you utilize the card well. In addition, many are going to offer a higher APR or an annual fee, which can make the rewards not worth it for how much you may use the card.
Use and Pay Off the Credit Card
Responsible use of a credit card is the best way to get a good credit score. Choose to use it well with on-time payments. The best way to do this is with small purchases. For example, fill up the tank in your car with some gas and then pay it off right away.
This is a good way to show that you can make payments on time and keeps the balance low. With a low amount of debt on your cards, you will be able to provide some good reports on a credit report if you need it.
Do Not Use the Card for Big Buys
Your credit card is meant to be a financial tool. But if you cannot use the credit card in a responsible way, you will dig yourself a hole. Do not use the card for big-ticket purchases unless it is an emergency. Failure to do so will:
- Make it hard to pay off the balance
- Cost you a lot of money in interest
- Can make you short on money when an emergency does happen
Your goal is to keep the credit line accessible. This can help when an emergency does occur and will make your credit score a lot better over time. Do not get into the habit of using the credit card all the time.
Pay Your Bills On Time
While managing your credit card is an important part of the overall health of your credit, you do need to pay attention to your other bills as well. All of your bills can factor into the credit score and can help raise it.
All three of the major credit bureaus will collect and list your rental payments on a credit report. This can be helpful in raising the score. And if you are willing to give Experian Boost access to your bank account, they will consider your bills, like utilities and phone payments, to factor up a new credit score.
All bills can be important in this. These include:
- Library fees
- Paying taxes
- Paying any other debt you owe
- Utilities
- Hospital bills
While not all of these will show up on a credit report when you pay them on time, failure to pay them could send you to collections and may cost your credit score a lot of points, making it hard to utilize credit in the future.
Never Co-Sign for Others
Co-Signing for anyone else is always a bad idea, no matter what your age is. But it is even worse when you are young. If your friend slips up on a payment or ignores the credit card or other loan, then you are the one who is on the hook as well.
You may think that your friend or family member is honest and responsible, but things do happen. And are you willing to risk your own credit score over something you have no control over? It is best to avoid co-signing to protect yourself.
Limit Your Credit Application
When applying for a credit card or another form of credit, limit how often you are applying. Applying for many credit cards at a time can make you look less desirable to the creditors and lower your score. This is because:
- All those inquiries will lower the score
- Creditors may worry that you are taking on too much debt at once
- You increase your chances of bringing on more debt with more cards
As a college student, one credit card is often plenty to get the credit score up. This can help to limit the temptations later on as well. But for now, keep the credit limited, so you don’t hurt your score.
Limit the Student Loans
Student loans are a great way to help students go to college, reach their full potential, and get a dream job later. However, it is really easy to take out extra student loans and use them to cover everything, not just educational expenses.
Only take care of educational items with the student loans. This can include things like:
- Tuition and fees
- Books and supplies
- Bus passes to get to school
- Dorms and meal plan
If possible, work a bit while in school to help pay for an apartment or keep the costs down. Make sure that you pay the student loans on time each month, especially if they are due while you are still in school.
Make Payments on Time
The best thing that you can do to help your credit score increase while in college is to make payments on time. Get a budget set up and know what money is coming in and what money is going out. This will help prepare you for making payments as an adult and will improve that credit score too.
Keeping Your Credit High as a College Student
Your credit score is critical to helping you get ahead in your adult life. Starting during college can be a great tool to help when you want to get a home or take other steps through life. By following the steps above, you can improve your credit score, even in college.
