College life can be hectic with packed schedules and extracurriculars, making it easy to get caught up in the moment. However, it’s important to keep your future in mind, particularly regarding your finances. Finances and credit use, like your credit score, may not seem important in college but will be crucial for your future and post-graduation life. Establishing and maintaining credit while in college can be very beneficial for you post-graduation.
It is thought that establishing credit as a college student is extremely challenging, but Collegeboxes has your back! We have provided some tips and strategies to get a head start and start establishing credit today.
Why Your Credit Score is Important
Before we get into the different strategies, some may be asking, “What is a credit score and why is it so important?” A credit score is essentially a prediction of your financial behavior and the likelihood you are to pay a loan back on time. Several factors contribute to your credit score, including:
- Payment history
- Length of credit history
- New credit
- Amounts owed
- Types of credit in use
Credit scores are important because they can determine whether banks will offer you a loan, mortgage, or credit card. It can even affect whether a landlord will offer you a lease to an apartment.
One of the largest factors influenced by credit scores is the interest rates on loans. People with lower credit scores often face higher interest rates due to the increased risk of default. Conversely, those with good credit scores typically benefit from lower interest rates, as they are considered more likely to repay the loan on time. A good score will help you save money in the long run, so having a good score post-graduation can help you tremendously.
1. Look Into Student Credit Cards
To help get your credit history started, it is a good idea to consider getting a student credit card. Student credit cards are designed for students and recent graduates tailoring to those with little to no credit history. The best part about them is they do not require collateral or security deposit making them very accessible. Some offer cash-back rewards and may have introductory interest rates or bonuses, making it fantastic for first-time credit card owners.
2. Consider a Secured Credit Card
Obtaining a secured credit card is another great option to help you establish a credit history. A secured credit card is just like a credit card except it requires a cash security deposit when opening the account. The credit amount is usually equal to the deposit amount, and the unique aspect of secured credit cards is if a payment is missed it will be taken out of your deposit. These make it easy for anyone to get their foot in the door and start building a credit history.
3. Become an Authorized User
If you are unable to qualify for a credit card because of a lack of credit history, there is no need to worry. Becoming an authorized user can not only give you a way to start building credit. It will also allow you to benefit from the history of the card owner. Consider asking a parent, guardian, or very trusted friend to be an authorized user as a way to establish credit.
4. Apply for a Credit-Builder Loan
Getting a credit-builder loan is a great option for those looking to start a credit history. Credit-builder loans work differently than traditional loans; the biggest difference being when you receive the full amount. Once you take out the loan you will start making payments. When you’ve repaid the loan, you’ll gain access to the full amount of money. Even though it does not work like a traditional loan the payments are still reported to the credit bureaus helping you build your credit history.
5. Form Good Credit Habits
The easiest thing you can do to improve your credit score is to practice good credit habits. This includes keeping an eye on your finances and credit use. Watching your credit is critical for your credit score, and using too much credit can actually hurt your score. So make sure not to use credit when you don’t have to and limit the number of credit cards you open.
Keep a close eye on your bills and monthly payments. Always paying on time and the full amount can only help your score. For many students, a consistent payment can be student loans or a Netflix subscription, and working on those is a great start. Not only is paying your bills on time important but also not overspending. Building a credit history does not require high use of credit cards, only consistent account activity.
6. Check Your Credit Reports
The work does not stop once you have established a credit history. Maintaining it requires care as well. Keeping an eye on your account is a great way to keep track of purchases, bills, and credit rewards. It is a great idea to make logging in and checking your credit account a habit, to avoid unwanted surprises and budget accordingly. You are now able to check your credit score weekly making it very easy to monitor.
It is also good to check your account frequently to monitor for suspicious charges. If you happen to notice a fraudulent purchase, notify your card issuer immediately, as it is possible your account was compromised. Reporting it immediately is important as waiting too long can lead to more purchases mixing out your credit and lowering your score. Don’t let someone else’s behavior ruin your score and monitor it frequently.
Building a strong credit history and improving your credit score can be challenging, but moving to college doesn’t have to be, thanks to Collegeboxes’ Ship to School service. With this service, you don’t have to worry about cramming everything into a car or suitcase. Just pack your belongings at home, schedule a FedEx pickup, and your items will be shipped to a local U-Haul near campus. Upon your arrival at school, they will be delivered right to your door. Make your move easy and focus on what matters, like building your credit.