Learn How to Build Your Credit While in College
One of the great things about being a young adult is that it’s unlikely that you have any negative marks on your credit. Having a great credit score is the result of having positive credit items, a good payment history, and time. A good credit score requires some credit history – the longer, the better.
Building credit is quite easy and there’s never a good reason to put it off. The sooner you get started, the better your credit score will be.
Tools to Build Credit
Just like you need tools to build a house, you’ll need tools to build your credit, too:
- Credit cards. This is the most common way to get started. Credit card companies usually consider you to be a good risk, primarily because they believe your parents will jump in and help if you get into trouble.
- Be picky. Since you do have a lot of options, look for the best card. The primary things to look at are the interest rate and the annual fee, if any. Be sure to read the fine print. A card might give you a rate of 8.0%, but then reverts to 21.0% after 90 days. Or the rate might rise dramatically if you are even one day late with a payment.
- Use your card wisely. That means that you pay it off, in full, every month. It also means that you don’t buy things you don’t need. Books, gas for your car, plane tickets, food, and more are all reasonable. Just be sure that you have the cash on hand to pay the bill when it arrives.
- Your credit score will be influenced by your payment history and the percentage of your available credit that you use. If your limit is $1,000 and your balance is $500, then your utilization rate is 50%. The goal is to keep it below 30%. Higher than 30% lowers your credit score.
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