By Taylor Mckaig
Typically, us college students have enough to worry about—paying tuition, keeping decent grades, securing a job, and figuring out that tiny detail of what in the world we’re going to do with the rest of our lives.
Establishing good credit, or even understanding what it is, is not that high of priority to most. Not to be the bearer of bad news, but your credit report and credit score will be an important asset to you sooner rather than later. What you may not know is that credit may affect you now by dictating the interest rate for your student loans. Credit will play an important role when you try to find an apartment post-graduation, when you buy a new car, when you want to consolidate your loan payments. Bottom line is that you should learn a little about it before it’s too late.
1. Consider a credit card
There are two ways to do this. You can either become an authorized user on your parent’s credit card, or you apply for a credit card your own. It’s easier said than done, especially if you have no credit, but there are few credit cards you can get as a student with minimal income. For someone like me, who has done everything in their power to avoid getting a credit card, I would advise serious and careful consideration before giving in. Do your research to find the card that would most benefit you. Use it responsibly.
2. Pay the entire balance
Say you do get a credit card. The smartest thing you could do it with is use it for small purchases and pay the entire balance off as you go. Contrary to popular belief, you do not need to carry a balance to earn credit. The reason most credit card providers want you to have a balance is simply for the interest you would accrue in doing so; that means more money in their pocket.
3. Use it sparingly
While you may be excited about your first credit card, don’t push your maximum allowance. According experts at Credit Karma, being overly dependent on using your credit card makes it look like you’re desperate to build credit, which puts you in immediate danger of accumulating interest faster than you can pay it.
Instead, using anywhere between 1%-30% of your available credit, shows that you use credit but are not “overly reliant” on it.
4.Pay your bills on time
Late payments are like a wrecking ball to your credit score. Making late payments will put you on the fast track to a bad credit score. Your credit will go down way quicker than it’ll ever go up. By paying your bills on time, you’ll be able to better establish your credit without using a credit card.
5. Take out a credit builder loan
This is another way to build your credit without necessarily using a credit card. If you borrow a manageable amount from a credit union or a community bank, the payment will usually be reported to credit bureaus and establish a repayment history, given you make the payments on time.