Having a good credit score coming out of college can make your future a lot smoother. Most students forget that post-college life even exists, let alone that important life decisions, like buying a car and getting a home loan, are in their near future. Credit influences everything from your interest rate on loans to your insurance payments – and even the kind of job you can get. If you’d like to start your future off right, here are some ways to build your credit while you’re still attending college.
Open a Credit Card
The most effective way to grow your credit history is to open a credit card. When you do this, however, it’s important that you find the card that’s right for you and your purchasing behavior.
Student Credit Cards
Student cards can be very generous and forgiving on the amount of income you make, and they have low credit requirements for easy qualification. Do research on what you’re signing up for, though. Make sure you’re aware of annual fees, interest rate changes and billing policies. Here are a couple of student cards you should consider checking out.
- Citi Dividend Platinum Select Visa for College Students
- Earn 5% cash back on supermarket and drugstore purchases, gas and utilities
- Get a 0% introductory rate for the first seven months, then 12.99%–20.99% depending on your credit score.
- Discover Student More
- You can use a cosigner to qualify for this card (parent cosigners can help you get approved due to their established credit).
- If you’re a minor, this is a good option due to the Credit CARD act of 2009, which prevents those under the age of 21 from opening a credit card without a cosigner.
- Get 5% cash back on restaurants, travel and groceries (categories change quarterly).
- Get a 0% introductory rate for the first six months, then 12.99%–19.99% depending on your credit score.
I recommend opening a student credit card through your school’s credit union if your school offers this option. Typically, student credit union cards have low limits, which is good if you’re planning to use your card for small, infrequent purchases. Having a student credit union card also allows you to take advantage of student benefits such as free ATMs on campus, great mobile banking apps and fun, campus-sponsored events.
Retail Credit Cards
Retail cards are historically known for having higher interest rates, but if you choose the right store card and use it responsibly, it could be the right option for you. Opening a retail card at a store you frequent could lead to store perks. Having a card through a big chain store like Target, which carries everything from bathroom cleaner to purses and produce, will lead to more savings on essential, inevitable purchases.
Target REDcard holders receive 5% off every shopping trip purchase in stores and online. In addition, REDcard holders get free shipping every day. For those unexpected trips to the doctor during finals week, Target pharmacy rewards gives you an additional 5% off certificate for every five prescriptions filled. Use this in combination with your everyday 5% REDcard savings and save big.
Make Small, Occasional Purchases
When opening up a credit card, it can be easy to let the “unlimited possibilities” go straight to your head. Make sure to keep your feet on the ground and the purchases infrequent. On the other hand, be aware that credit card companies will cancel cards due to inactivity, so try to make just enough purchases per month to meet your credit requirement and only that. You should treat your credit card as if it’s a debit card so that you are never spending money that you don’t have and you’re able to pay off your bill at the end of each month. CreditCards.com suggests putting recurring charges on your card, such as Netflix or groceries, and only that. Personally, I like to write down all of my credit charges in a notebook right after I use my card so I’m always aware of how much I’ve spent.
Pay Bills on Time
When I first lived on my own at school and had a bill in my name, I was shocked to find out that my very overdue cable bill was affecting my credit score and my future. Even though you and your roommates are all responsible for the payment of a bill, if it’s in your name, it’s important to take responsibility for paying that bill on time; in the end, it only will affect you. Come up with a good system to make sure money is collected before you submit the payment if you’re uncomfortable fronting money for others. Venmo is a great mobile app for college roommates who split utility bills.
Don’t Leave Balances
At the end of every month, you technically only have to pay off the minimum on your credit card bill – but that doesn’t mean you should. As a student with not much of an income, leaving a balance on your credit card bill will lead to a never-ending high balance. Having a continually high balance will take a toll on your credit over time. That’s why it’s important to only spend what you can pay off. Be responsible and make sure you’re always aware of your expenses. Every month, pay your credit card bill on time and in full.
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Have other useful credit-building tips? Share them in the comments section below!