Having good credit can help create financial possibilities, such as qualifying for the best private loans or credit cards. But more than that, it can also impact your capacity to secure an apartment or land a good job. Note that some landlords and employers tend to reject tenants and job applicants with low credit scores.
Your credit score is made up of several components, and 15% of it comes from the length of your credit history. That’s why building your credit as early as in college would be an excellent financial move. But though it gives you more time to work on good credit, doing so can be trickier when you’re still studying.
To give you a head start, here are some helpful tips on building a credit score as a college student.
1. Make Timely Payments on Student Loans
Student loans are among the resources you can tap to pay for a college education. But it can also be a tool to establish a good credit score. Like other types of loans, you have to repay student loans in regular installments within a predetermined period.
Since each repayment will be recorded as part of your credit history, it can significantly affect your credit score. Bear in mind that 35% of your score is based on your payment history. By making timely payments on your student loans, you’ll bump your credit score up and boost your creditworthiness.
2. Get Added As An Authorized User On Your Parent’s Account
You can also leverage your parent’s good credit by getting added as an authorized user on their credit card. It means you’ll have a credit card in your name that is linked to their account. As an authorized user, you can make purchases using the card. But you don’t have the authority to make any changes to the account, such as requesting a credit limit increase.
This strategy works best if the primary user has a zero late payment history and a credit utilization under 30%. But make sure the card issuer reports authorized user status to the credit bureaus. Being added to the account won’t help your score if your authorized activity doesn’t reflect on your credit reports.
3. Acquire A Secured Card
Acquiring a secured card is another option that can help you build your credit score. It functions the same way as traditional credit cards. The only difference is that you pay a cash deposit upfront to guarantee your credit line. In case you miss payments, the deposit serves as a security for your purchases.
Since your monthly activity on the secured is shared with the credit bureaus, you can boost your credit quickly, provided that you practice the following habits:
- Make on-time payments
- Keep your balances low
- Pay off your balances
4. Get Credit For Your Rent Payments
Building good credit requires a positive payment history. As a student, rent is most likely one of the bills that you pay consistently every month. Although paying your rent on time isn’t automatically reflected on your credit, you can use reporting services like Rental Kharma or Rent Reporters. They will send information about your rent payments to credit bureaus.
Rent payments can only help build your credit if you’re consistent with your payments, and you can always ensure that they are reported to credit bureaus. It’s also worth noting that some reporting services might cost money or require your landlord to verify your payment.
So, consider your budget and make sure your landlord is willing to participate before going on this option.
5. Learn to Manage Credit Wisely
Your good credit behavior is an essential factor when building your credit score. When you know how to manage credit wisely, you’d be able to pay off your balance in full and on time. It’s also important to only take on debt that you can afford to repay.
As much as possible, use your credit card only for occasional and small purchases. The same applies to your student loans. Sifinances, one of the reliable lenders online, are willing to give favorable terms to trustworthy borrowers.
So only borrow what you need for education expenses and pay them on time. By practicing these good credit habits, you will keep your debt levels low and make your profile a low credit risk.
6. Establish Your Credit As Early As You Can
College is an excellent place to start building and maintaining good credit. It can help you prepare for financial opportunities after graduation. However, it’s vital to remember that cultivating the right credit habits should be at the top of your list.
After all, a good credit score ultimately comes from taking on debt responsibly, which is a result of your daily financial decisions and practices.