Going to college can be the greatest experience of your life. You not only get to learn new things and meet new people, you also find out what it’s like to be responsible for your own actions, and plan for your future. That’s a lot to undertake in four years. One of the most important things you can do while in school is to establish a good credit score. Following are a few tips on how to build good credit as a student.
Using a Credit Card in College–Smart or Dumb?
Although you may be tempted to say that using a credit card while you’re in college is a dumb idea because you could rack up a lot of bills with no way to pay them off, the truth is that not using a credit card can harm you in the long run–providing you use a credit card responsibly. That’s the key, responsibility. If you fore-go using a credit card, you will be forced to live on whatever money you have available to you. That’s fine, as far as it goes. No debt means you’ll be able spend the money you have, and nothing more. The problem is that when you finally graduate and enter the workforce, you won’t have a very good credit rating, so you’ll be forced to live only on what you make–meaning you will have to save money for a house or car instead of being able to buy them on credit and make payments. Lenders are extremely reluctant to take a chance on people with no credit–you may be able to get a small loan, but your interest rates will be probably be excessive.
Build Credit Through Student Loans
If you have any hope of ever being able to borrow money at reasonable rates, you need to begin building your credit rating as early as possible. Some people begin while they’re still in high school. If you didn’t, there’s no time like the present. You probably need help paying for college anyway, so one of the easiest and safest ways to begin building credit is to take out a student loan. Due to the fact that most college students must depend on their parents as cosigners, the loans are fairly easy to get, and they have relatively low interest rates.
Open a Checking or Savings Account
Although having a checking or savings account won’t help build your credit rating directly, having an account in your name will make it easier for a lender to confirm your financial history. Make sure you keep money in the account and that you’re never overdrawn–that’s an indication to a lender that you’re unreliable.
Get a Store Credit Card
One of the easiest and fastest ways to establish a credit history is to apply for a credit card from a department store. These cards are relatively easy to get because the line of credit is far less than a bank card. Be aware that interest rates can be rather high, so it would be a good idea to keep your purchases at a minimum. A store credit card also offers the convenience of discounts on items you buy there. If you’re fond of shopping at a particular store, it may be a good idea to apply for a card so you can help build your credit while receiving discounts on purchases you would make anyway.
Get a Gas Credit Card
Another quick and easy way to build credit is to get a credit card from a gasoline company. If you’re like most people, you frequently stop at the same station for gas. Like a store credit card, a gas station card can be acquired more easily than a bank card because the line of credit will be smaller. Keep in mind that like a store card, your interest rates may be a bit higher, but that may be offset by the convenience of being able to use the card instead of carrying cash.
Get a Prepaid Card
Using a prepaid card can also help you build credit, providing you make sure the card you’re using reports to the credit bureaus. Having a card to use is convenient, and having a prepaid card will provide you with the benefit of using it to pay for purchases combined with the advantage of knowing you won’t spend more than you have in the account.
Pay On Time
No matter which type of card you use to help establish your credit rating, make sure you pay the monthly bill on time. It doesn’t really matter if you pay off the entire amount every single time, but you must pay the minimum balance. Keeping your amount of available credit high and the amount you owe low will also help you credit rating.
About the Author: Taylor Harris writes about online colleges and universities for BestOnlineColleges.com.