If you do not have any credit, then it is time that you start to build it in college.
Your credit is more important than you think and it will have a big impact on you in your future. Unfortunately, if you ruin yours early on, you will be left struggling to afford things and you will find that it is difficult to obtain any accounts in your name.
It is vital that you pay attention to your credit and that you work towards building it now, so that you can enjoy the benefits it has to offer later on.
Get a Credit Card
One of the first steps to building your credit in college is to get a credit card. Yes, you have probably heard that credit cards are bad, but they are not all bad. In fact, if you pay your bills and only spend what you have available, you will be able to responsibly own a card.
When you first apply, do not go for an outrageous credit line. You likely only need $500 or $1,000 to start and this is a number that you can reasonably manage each month.
When searching for the right card, always choose one that has your best interests in mind. For example, consider a card that offers cash back rewards or choose a card that does not have an annual fee. Many of the student cards offered by companies are very college student friendly.
The more time you put into finding yourself a card that will suit you, the more likely you are to be able to gain good credit.
Pay Off Your Credit Card Balance Each Month
When you make a purchase on your card, do NOT purchase something you do not have the money for. This is because to build good credit, you really need to be able to pay off your card balance each month.
If you rack up a ton of debt, you will be stuck paying the minimum amount monthly and you will never seem to get ahead of yourself as interest adds and tacks on to your fee.
Pay Your Bills
While we mentioned you should pay your credit card bill, you also need to pay all of your other bills on time. If you have an electric account in your name, pay it on time every month. Even a slightly late payment will impact your score negatively.
In addition, make sure you make all of your student loan payments on time, if you have them. Not only can missing these payments result in a lower credit score, it can also make you ineligible for student loan refinancing.
If you have the funds and means to do so, you should try to pay your bills early each month. This way, there is no possibility that the bill is overdue.
Avoid Co-Signing
Unless you are co-signing something with your parents, do not co-sign for anyone else. If you do, you may find that the burden of payments falls on you and if the person is late making a payment, it affects your credit too.
Avoid the Inquiries
When you apply for credit, companies will do what is called a hard inquiry. This is when they look at your report and score. Too many of these can have a negative effect on your card and leave you with a poor score before you even achieve credit.
The best way to handle this situation is to avoid applying for anything until you are SURE it is right for you. For example, if you need car insurance, do not go to 5 different companies and have them all pull your credit at different times. Talk to them, receive a soft quote, and then only have the company you are interested in run your credit.
Watch for Inconsistencies and Errors
When you first start building your credit in college, you will be able to notice any odd requests, inconsistencies, or errors on your report. You should report any when you do find them, as they can hurt your score. Monitoring your credit report is a great way to keep track of what is going on in your personal financial world.
When you want to build credit in college, you should first start with a credit card. Remember, you need to make all of your payments on time and do everything in your power not to ruin your credit score.
Sources:
- Best College Student Credit Cards of 2016
- The 9 Best Student Loan Consolidation & Refinancing Companies
- 5 Dire Warnings for a Credit Card Co-Signer
- Credit Monitoring
