Between pizza and parties, good credit might be low on the priority list of the average college student. Yet a high credit score makes it easier to get a car loan, rent an apartment, and cope with unexpected financial emergencies—things that do rank highly among new college graduates. Fortunately, establishing good credit in college is easy. Below we offer our top tips for college students who want an “A+” in personal finances:
- Get a Credit Card. This step is often difficult for a person with no credit history. However, there are ways to get around this. One option is to apply for a secured credit card—this type of credit card requires you to provide a deposit as collateral which serves as your credit line. Alternatively, you can ask your parents to add you as an authorized user to one of their credit cards. This allows you to “piggyback” off of your parent’s good credit history, raising your own credit score. If neither of these options are appealing, consider a retail credit card. With their smaller credit lines, these are typically easier to obtain, and they help build your credit history.
- Keep the Balance Low. You have to use your credit card to establish credit, but running up a high balance decreases your credit score. Instead, plan to use your card sparingly. For instance, you might decide to pay small monthly expenses with your credit card, like Netflix or your cell phone bill.
- Pay On Time. Payment history makes up 35% of your credit card score. Always pay off your full balance on time each month. If you struggle to do that, you might be living beyond your means and could benefit from a budget.
- Don’t Apply for Multiple Cards at Once. Avoid the tendency to go overboard with credit cards. FICO—the company that determines your credit score—says that opening a lot of new accounts rapidly hurts your score. For college students, one or two credit cards are plenty.
- Pay Student Loans. After graduation, the sticker price of your education can be jolting! However, student loans also contribute to your credit score. If your loan payments are unaffordable, don’t hide from your loan officer. Instead, explain your financial situation—loan servicers have a number of different options to reduce or defer payments.
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