Credit cards and FICO scores, oh god! Those are two extremely intimidating things for new college students. I know I had no idea how to build a proper credit history when I first. left off to college. SO how exactly do you establish credit as a college student?!
I have found a lot of ways to establish credit as a college student. Paying all your credit cards on time, only applying for one card at time, and getting an authorized co-signer are just some of the simple ways a student can start establishing credit for themselves.
College students can quickly build their credit by getting a credit card and using it responsibly. It’s surprisingly easy and will save you big bucks in the long run!
If you’re a college student applying for your first card, you know how important it is to build your credit core. Your credit history is built with a three-digit credit score, which basically means how trustworthy you are with money.
There are a variety of credit-building options available to college students. Whether you know a lot or nothing about credit cards, you can establish and manage a positive credit score to support your educational and career goals easily!
Here are some simple ways to set up a good credit score while you’re still a college student –
Best Ways To Establish Credit While In College
Understand What Goes Into A Credit Score
If you don’t understand what goes into a credit score, it will be hard to build your credit. The FICO (which is the mos popular credit scoring model) uses the following weighted model:
- 35 percent payment history
- 30 percent amounts owed
- 15 percent length of credit history
- 10 percent types of credit used
- 10 percent new credit
This basically shows you that paying your cards on time has the biggest impact on your score. Another important takeaway is you’ll want to keep your balances low compared to your credit limit.
Credit history is tricky for college students as many have just entered the real world and are applying for a credit card for the first time. But you still have control over the rest of the pie.
Start Using Your Credit Card
Starting to use your credit card is a smart move for many college students financially. Not only does it help build up your credit history, but it also gives you practice using credit and demonstrates that you have the responsibility and maturity to handle a revolving line of credit.
And – getting that first card can be exciting, so applying early in your life can be a great experience.
A student’s first credit card is an important step in establishing their credit history. Even if you don’t have the money to buy things, having a credit card is essential to your financial well-being!
Then, when you’ve grown into the responsibility, you can graduate to even bigger and better cards – maybe even an airline rewards card or one with a great cash-back bonus!
Get An Authorized Co-Signer To Get A Credit Card
Everyone needs to have a credit card for everyday spending. But if you are a college student and don’t have any credit history, getting a credit card can be very difficult.
Any college student who is trying to establish good credit for future use can always get a co-signer.
You will need someone who has excellent or good credit, that you trust and would not mind helping you out if you fall into your debt of paying back the bill if something goes wrong with your bill payment process.
It is always great to have a security net with you as well.
Keep Your Accounts Open
Remember, 15 perfect of your credit score is composed of the length of credit history.
Because of this, it’s recommended to keep your oldest credit card account open. Closing an account can shorten the length of your credit history and hurt your score in the longrun.
Pay Your Student Loans on Time
You may feel that paying for college comes with big-time loans and you are always overwhelmed by the number of loans that you have to pay. However, you can work on paying off your student loans by establishing credit for a college student.
Establishing credit helps you to build a good credit score. Payments on your loan help in making this happen. By making timely payments, you demonstrate your ability to repay the debt which improves your credit score. The better your credit score, the less interest you will pay on your purchases.
Examine Your Credit Score
A credit score is an overall rating that is used to assess your ability to repay long-term debt such as loans and mortgages. A credit score will tell you what kind of borrower you are and your financial status. Hence, examining timely is very essential.
Having a good credit history and a favorable credit report is important for getting a loan, lease, or apartment. Maintaining credit is more than just keeping your payment history positive. You should monitor the information that appears on your credit reports to ensure it is accurate and up to date.
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Choose The Right Credit Card
The foremost step in choosing the right credit card for college students is researching the best cards available. Before getting a student credit card, you should first look into the different types of cards available to you.
Selecting a credit card is not as easy as it seems to be. You need to compare among many credit cards available in the market, you have to research rules & regulations, interest rates, annual fees, and many other things. Make sure you have gained enough idea about their billing policies.
Don’t Apply For Multiple Credit Cards At A Time
New credit inquiries make up 10% of your score! Constantly reapplying for new credit cards can affect your score greatly and hurt you in the short-term.
Just find one, two max, credit cards you really like and apply for those. If needed, ask a parent or guardian to cosign the card.
It can be tempting to have multiple cards, especially with all the benefits they offer (those miles and points get me too!) but stick to one good starter credit card and take care of it.
It can get overwhelming having more than one anyways.
Always Pay On Time
Very often you hear that establishing your credit score is extremely important. College students get a credit card and start spending impulsively without thinking about paying off the credit in time. The result of that is bad credit history and lifelong problems with it.
Paying on time is extremely important not only to establish good credit but also to keep your credit report free of negative records. The data will show that you were responsible and used a trusted financial source when making purchases.
Do Not Get Crazy
The biggest mistake that young people make is that they get their credit cards and they go wild.
They charge up the credit limit on that card and run up thousands of dollars of debt. This is why many college students find themselves massively in debt when they graduate from college. Establishing good credit is a must for college students without misusing it.
It is very important to understand the importance of using a credit card properly and legally if you are someone who is trying to establish a good credit history. You need to be aware that putting everything from groceries, gas, and entertainment on your card is not going to have the desired effect on your credit score.
The Bottom Line
As a college student, one thing you realize is the power of having a good credit history. You need to understand how important it is to have a credit history or you may be paying much more than what you are supposed to do overtime.
The major objective of this article is to make you familiar with how to establish credit for a college student. This material endeavours in providing you with general information about college students and the correct way to start.
Students usually have less earning potential, and because of their young age and limited net worth level, are less likely to qualify for a loan. In such cases, credit-building measures might be important.
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