The Right Way to Build Credit as a College Student

Creating a good credit while in college is among the best financial intelligent moves students must undertake. With a good credit score, they can qualify for rental applications, loans, auto insurance, phone plans and it can even help them find a good job.

For students, to be responsible for their credits is an important way to set up a high credit score. For students with little to no credit history, we have made a list of few but very important steps such students they can take to show how careful and responsible they can be with credits. Moreover, these can be done without you being indebted.

The following are simple methods a student can be responsible for credits and build a good credit score.

1. Store credit cards

One of the easiest ways to get a credit card is doing so through a store. Department stores like Kohls and Nordstrom often offer customers on the checkout line a credit card.

A big warning though, (and this applies to all credit cards), is to completely pay every penny at the end of every month. Credit cards from retail stores have interest rates higher than the regular credit cards, so if you do not pay on time with a retail card, you may have more debt than you would when using another credit card.

2. Tradelines Of Credit

Being added as an authorized user on a well-established credit account with a long history of payments in good standing is another option that you may want to consider.

Imagine the effect of having a 17 year old account that has never missed or been late on a payment, pays more than the minimum payment each month and keeps their usage below the amount that negatively effects the account holder(s). The sky is the limit and if you need or want a 50 – 150+ point credit limit increase this is one of the most viable options to improve your credit score in 30 day increments.

3. Use student credit cards

There are credit cards given to students and those who do not have a credit history. Federal law limits the issuance of credit cards to persons under the age of 21, unless such applicant has the ability (independently) to pay the debt, or if a co-signing adult accepted a joint liability for the account.

Credit cards for students usually have low credit limits; for example, there may be only $1,000 made available to a card. Otherwise, they are not different from the other credit cards and may even have such features like no annual fees, cash back, and budget management tools.

4. Regular credit cards

If you qualify, a normal credit card must be the next step to getting credit and making good use of it. A normal/regular credit card has higher credit limits than any of the cards previously mentioned and offers much better rewards programs.

It is important to first do your research. Look for cards with low interest rates, zero annual fees, good credit limits and clear billing policies. These are the kind of cards you want.

How to make the best use of a credit card as a student

After receiving a credit card (anyone mentioned above), then you must start using it gradually. You can use it for occasional small purchases for which you can pay on time. This will assist in building your credit history and help you avoid debt.

Leaving a new card in your wallet without using it might prompt the bank to close it due to inactivity. So use it, or the bank might close it due to inactivity.

Using student loans to build your credit

Defaulting on your student loans is one of the last things you might want to do either as a college student or as a fresh graduate.

Strive to make the least minimum payment every month and make sure you do it on time. Do not borrow for what you don’t need in school. You can borrow for your tuition but not to go on a date or buy a car. Upon graduation, you might want to get a better interest rate by consolidating your student loan.

One-time payments and clearing off your student loan improve your credit score over time. If you have any problem with payments, contact your lender and ask for forbearance.

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