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Adulting Student Life

How to Build Credit as a College Student

October 18, 2021

Going to college is all about learning, which includes your studies, but also gaining a better understanding of how to manage your finances. A key part of this is building your credit. 

According to Experian, the average FICO score — a type of credit score — in the U.S. in 2020 was 711, which falls into the good credit score range. Good credit can open up more financial opportunities during college and beyond, including more favorable loan terms and interest rates. 

If you want the benefits of having a healthy credit score, here are a few ways to help build your credit to above-average and excellent levels.

Apply for a student credit card

It can be difficult to qualify for certain credit cards when you’re starting to build credit, but student credit cards typically have less strict requirements. Even better, many of the best credit cards for students don’t come with annual costs and provide valuable benefits — which could include earning cash back on your purchases.

To find the right student card for you, consider the benefits and earning rates being offered. A card might be a good fit if its benefits and cashback bonus categories align with your spending habits and lifestyle.

Become an authorized user

You don’t have to apply and qualify for your own credit card to start building your credit. Many credit card companies allow for authorized users to be added to existing accounts. The account owner controls what the authorized user has access to, including having their own card connected to the account.

The benefit of becoming an authorized user is being able to build your credit with the help of the account owner. As long as the credit account is being used and paid off, you should see your credit start to grow. Talk with a family member or trusted friend about becoming an authorized user on their credit card account and whether it would make sense for you.

Use credit responsibly

An essential part of building and maintaining a healthy credit score is ensuring you always use credit responsibly. For example, it typically doesn’t make sense to carry a balance on a credit card because of high interest rates. Paying off your balance in full each month can help you avoid costly fees and interest charges and stay on track toward your financial goals.

It’s important to use credit responsibly so you can improve your credit score. Part of this includes budgeting for your monthly payments and making them on time — whether you open a credit card or take out a loan.

Add rent payments to your credit report

If you’re the type of person who has renters insurance and always pays rent on time, it could make sense to research and consider using a service to report your rental payment history. 

Rent payments aren’t often automatically included on credit reports, but certain services can help report your positive rent payments to different credit bureaus, which could boost your credit score. Since most college students are just getting started building credit, there’s no credit check for GradGuard’s Renters Insurance.

Consider a credit-builder loan

Apart from credit cards, you can also use loans, such as credit-builder loans, to help build your credit. With a credit-builder loan, a lender will typically add the proceeds to a secured savings account. You’ll make regular monthly payments toward the loan balance, and the money becomes available to you once you pay off the loan.

You have to pay some interest for the borrowed money, but this type of opportunity can be helpful if your options for building credit are limited. Many banks and financial institutions offer credit-builder loans.

Final thoughts

No matter your field of study, having a solid understanding of credit and its potential benefits can help shape your future financial decisions. And if you start building your credit now, you’ll pave the way for unlocking valuable financial opportunities down the road.

BIO: FinanceBuzz’sVP of Content, Tracy Odell, also held the same position at Student Loan Hero and has expertise in this subject, as well as all things related to college finances.

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How To Use Student Credit Cards To Improve Your Credit Scores

January 15, 2018

Most students who enter college are new to the world of credit. But this isn’t an indicator that you have poor credit. It just means you have limited credit.

Building credit is important because it allows you to buy a house or car, and helps you pay less for insurance. When looking into these types of larger purchases, there is usually a credit check required. Having poor or limited credit can make it more difficult to move forward with your purchase. Lower credit scores can also lead to higher monthly payments.

Credit cards are one of the best ways to add a line of credit to your credit scores. There are student credit cards that are designed specifically for this purpose. Student credit cards are easy to get with limited credit and will help you build your credit scores over time. While you use your credit card to build credit, keep these tips in mind to make the most out of your card.

Pick a Card That Fits You

There are tons of credit card offers out there designed for each type of person. By taking the time to research each card and ensure you completely understand all the fees and terms associated with your credit card, you’ll be able to choose what card fits your lifestyle the best.

Some cards come with annual fees. If you’re new to credit cards, you’ll probably want to start with a card that doesn’t have an annual fee. Paying an annual fee usually offers you extra benefits, but it’s important to decide if you would use these benefits enough to offset the card’s fee.

Some student credit cards offers a rewards program to use their cards. Rewards are usually offered through cash back on all purchases or certain categories. When you’re looking for a card, consider what categories you spend money on to determine what card will maximize your rewards.

Be Disciplined

There is risk associated with a credit card. It’s important to remain disciplined and avoid charging what you can’t afford onto your card. By being more strict with your purchases, you can avoid interest and credit card debt altogether. Also, by using and paying your card off on time and in full, you’ll be building your credit scores.

If you do happen to have credit card debt, make sure you’re paying more than the minimum payment! It’s a mistake to think that you’re worry-free by paying the minimum amount each month. Pay as much as you can towards the accounts with the highest interest rate and get that debt out of your life.

Take Advantage of the Extra Benefits

Many credit cards come with extra benefits that can help you feel more confident in your purchases. These benefits include extended warranties and returns on purchases you make. Also, they usually come with protections in place if your card has fraudulent charges on them. This takes the liability off of you. So as long as you’re using your credit card responsibly, you can feel secure with the money you’re spending.

Building credit is important as you start to look for houses, cars, or even insurance. If you’re entering or in college, a student credit card is a great option to build your credit scores and help prepare for the future. Remember to use your card responsibility to increase your scores and avoid debt. When you use credit cards, take advantage of the extra benefits and awards they offer to feel good about all of your purchases.