No matter how much fun you’re having in college, it never lasts long enough. Before you know it, you’ll be out in the real world and responsible for paying your own way, buying a car and even taking out a mortgage some day. Having great credit will help you reach those milestones, and you should start taking steps to building your credit as a student — long before you walk across the stage and receive that diploma at graduation.
Get a Credit Card
While you may be wary of getting a credit card, it can be a great tool to help you build credit — if you use it appropriately. Applying for a student credit card is a good first step, since those cards tend to have less stringent requirements regarding your income and credit history — and college students often have limited amounts of both.
Don’t sign up for a credit card just to get a freebie like a shirt or a ball. Instead, take the time to read the fine print and consider the annual fee the card charges (if any), the grace period for making payments, the interest rate, plus other fees and any rewards like cash back.
Smart Ways to Use Credit Cards
If you don’t qualify for a credit card on the first try, you’re not doomed to have poor credit forever. Try asking your parents to add you as an authorized user on their cards — as long as they have positive history with them. You can also apply for store cards, secured cards or prepaid cards.
However, make sure any prepaid card reports to the credit bureaus. The benefit to reporting is that it builds credit history, which factors into your credit scores. Of course, this only helps if you pay on time. If you make late payments, that negative information will make it a lot tougher to build solid credit.
Perfect Payment History
Any good plan for building strong credit as a college student must include paying all bills on time. Though it’s important to use your credit cards from time to time, it’s more important to pay, at least the minimum required payment, on time each month. In addition, make sure you’re making any required payments on any student loans.
For example, if you’re in a master’s program and take out a PLUS loan, you’re required to start making payments on a student loan as soon as you receive the funds. Similarly, making sure your credit card gets paid every month will help establish you as a credible borrower.
Monitor Your Credit Reports
Credit scores are based on the information in your credit reports, so if there’s something inaccurately reported in your credit reports, your scores could suffer. You’re entitled to a free copy from each of the three major credit bureaus once a year, so you can make sure they don’t contain any inaccuracies or show any signs of fraud. In addition, some credit cards give you free credit score access so you can track your progress.