- 10 ways students can build good credit
- 10 ways college students can boost good credit
- 1. Become an authorized user on a parent’s account.
- 2. Open up your own credit card
- 3. Get the right credit card for you
- 4. Use the credit card for occasional, small purchases
- 5. Avoid big-ticket buys, except in case of emergency
- 6. Pay off your balance each month
- 7. Pay all your other bills on time
- 8. Don’t co-sign for your friends
- 9. Do not apply for several credit cards at one time
- 10. Use student loans for education expenses only, and pay on time
- 6 Reasons to Have a Credit Card in College |Discover
- Build a Credit History
- You Can Help Avoid Fraud and Identity Theft
- Learn to Budget
- Enjoy Rewards and Cash Back
- You Can Handle Emergencies
- Renting or Buying a House or Apartment
10 ways students can build good credit
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One of the most exciting parts of growing up is becoming financially independent, but learning how to do so can be challenging. Building good credit is a must: It will help you qualify for loans, auto insurance, rental applications, cell phone plans and can even impact job prospects.
10 ways college students can boost good credit
How do you get started? The Credit CARD Act, most of which took effect in 2010, changed the rules of the game by banning credit card issuers from approving anyone under 21, without a co-signer or proof of independent income.
Basically, if you can’t prove to the issuer that you have the means to pay your balances, you probably won’t get a card. But with or without a credit card, it still all comes down to being responsible.
We asked several financial experts to explain how you can effectively build good credit. Here’s what they recommend:
See related: Sending kids off to college with a rewards credit card
1. Become an authorized user on a parent’s account.
“I always advise parents when the student is going off to college, unless you’re 100 percent sure they’re responsible, the first credit card that student should have is yours,” says Mike Sullivan, former director of education for Take Charge America, a Phoenix-based nonprofit financial education and consumer debt service organization.[nlewstetter]Becoming an authorized user on a parent’s account can help build good credit by “piggybacking,” a controversial practice that FICO – creator of the widely used credit score bearing its name – continues to permit among family members.
Using piggybacking, if your parent has good credit, your credit will get a boost, with fewer risks associated with having your own credit card, since the primary account holder will be able to monitor spending.
Becoming an authorized user has long been a popular choice for students aiming to build good credit. But in the wake of the Credit CARD Act, it may now be the only choice for some.
2. Open up your own credit card
If you can provide proof of income, it may be time to apply for a card in your name. But know that things have changed from the days when every college freshman’s dorm mailbox overflowed with credit card offers and card issuers rained free pizza and T-shirts on students who applied.
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In this post-Credit CARD Act era, most issuers are no longer clamoring to put a credit card in the hands of every college student. Some no longer offer student cards; others switched to pushing debit cards on campus.
Also know that when you receive a credit card that’s all yours – one with no co-signers – the responsibility for handling the card wisely and repaying your debts falls squarely on your shoulders.
3. Get the right credit card for you
Once you’re able to qualify for a regular card on your own, it’s important to remember that not all credit cards are the same, says Clarky Davis, former spokeswoman for CareOne Credit Counseling, a debt relief service provider based in Columbia, Md. and formally known as the “Debt Diva.”
Before you apply for a credit card, you “must do some research to find a card with the most benefits – a lower interest rate, no annual fees, reasonable credit limits and clear billing policies,” says Davis.
If you think you might carry a balance, go with a no-frills, low interest credit card. A reward credit card may sound cooler, but the higher annual percentage rate (APR) and possible annual fee won’t be worth it.
Sullivan says some students should consider starting out with a retail card. Retail cards come with fewer benefits and lower spending limits, but using this card and paying the bill regularly will build good credit.
Davis says those who can’t qualify for a retail card will need a secured credit card, which is attached to a savings account. However, if you pay the bill responsibly and on time, you’ll eventually qualify for a regular credit card.
That includes student credit cards, products that are directly aimed at consumers who may lack significant borrowing history.
Retail cards come with fewer benefits and lower spending limits, but using this card and paying the bill regularly will build good credit.
4. Use the credit card for occasional, small purchases
Since responsible card use and on-time repayments will help you build a good credit history, while also discouraging the bank from closing your account due to inactivity, don’t just leave that plastic sitting in your wallet.
“Getting a credit card means you start a credit history and shows on your credit report that you have one account and no late payments,” Sullivan says. “But if you really want to start credit, you have to use the card.”
One way to do that? Consider putting small, recurring charges on your card: Think of regular expenses, such as groceries or monthly subscriptions ( Netflix), that you won’t have trouble repaying at the end of the month.
See related:Multiple monthly card payments can boost credit scores
5. Avoid big-ticket buys, except in case of emergency
“A credit card is a valuable financial tool. However, students must be able to manage their credit card responsibly to benefit from using the tool,” Davis says.
Keeping your debt levels low will ensure that if there is an emergency, you’ll still have plenty of your credit line accessible.
So, if your tire blows out or your cell phone falls in the toilet, you can purchase a replacement without exceeding your credit limit.
A credit card is a valuable financial tool.
However, students must be able to manage their credit card responsibly to benefit from using the tool.
6. Pay off your balance each month
When you are first building good credit, do your best not to carry a balance on the card. Use the card only for purchases you can afford, and pay off the balance at the end of each month. What if you can’t? You are living beyond your means and shouldn’t be making those purchases.
“A student should only have a credit card if he or she has a job or some sort of income to support this financial tool,” Davis says. If you carry a balance, you will owe interest fees.
Why pay a fee if you don’t have to?
See related: Student credit cards: The definitive guide
7. Pay all your other bills on time
Think only your credit card affects your credit? That’s how it used to be, says Sullivan, but “right now, there are a lot of folks, including credit bureaus, who are developing alternative credit scores for no-file people, which includes lots of young people. They’re giving some credibility to utility payments.”
In 2018, one of the three major U.S. credit bureaus, Experian, launched Experian Boost. If you grant Experian permission to your bank account, this platform will report mobile phone and utility payments – which could give you more control over your credit score.
All three major credit bureaus also collect and list rental payments on credit reports. But this is dependent upon landlords reporting this information, and not all do.
Sullivan says other dues, such as taxes and library fees, can make a difference, too. He has seen students whose credit has been ruined because they failed to pay a traffic fine. Davis agrees: “Paying all your bills – from apartment rent to your Internet service – consistently and on time is essential.”
8. Don’t co-sign for your friends
Just you may need an adult co-signer to get approved for a card, your under-21 friends will, too. To help them get approved for a card, some of these friends may approach you to become a joint account holder. “I have found that some students are getting older students (fraternity brothers, etc.) to co-sign. That is quite dangerous,” Sullivan says in an email.
Consumer experts have a tip for you: Don’t. That’s because when a friend slips up – by taking on too much debt or missing payments to the bank – the co-signer can quickly see their own credit ruined.
“You not only become liable for everything charged if your friend decides not to pay, but it could blemish your own credit record,” says Edgar Dworsky, founder of the website ConsumerWorld.org.
Making your friend an authorized user also poses risks. Once again, their mistakes can hurt your credit, although – un when you co-sign on a card – an authorized user can be easily removed from the account.
9. Do not apply for several credit cards at one time
Now that you have credit in your own name, don’t go wild. If you apply for too much credit in too short a period of time, your credit score will fall. If you have built up strong credit over several years, it will hurt you less.
“But if you have barely established credit and apply for multiple cards, it can lower your credit score significantly,” Sullivan says.
One credit card should be enough for most college students, he says. How many cards should you have? “To prevent excessive credit card debt, it’s better for consumers to have as few credit cards as possible.
Having just one card is ideal for most students,” Davis says.
Now that you have credit in your own name, don’t go wild.
If you apply for too much credit in too short a period of time, your credit score will fall.
10. Use student loans for education expenses only, and pay on time
“Students should view their student loan as a great way to cultivate important habits that will help them build and maintain good credit,” Davis says. If you use them correctly, that is.
Sullivan says he sees a lot of young people take out student loans to buy cars and other noneducation items. “Manage your loans by only borrowing what you need to go to school — that keeps the balance down,” Sullivan says. “When you get school, be prepared to consolidate when appropriate.”
Davis and Sullivan agree that the real key to keeping your loans healthy is to make at least the minimum payment every month and do it on time. Davis recommends paying more than the minimum to pay the loan off faster, and emphasizes that payments should be received by the creditor on or before the due date on the statement to keep the account in good standing.
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
6 Reasons to Have a Credit Card in College |Discover
A credit card can be much more than just a convenient way to pay for today’s college expenses. It can provide peace of mind in emergencies, be a fun way to accumulate rewards and cash back, and be a useful tool to help college students establish life-long good financial habits.
Of course, these are changing times and many might be reconsidering what it even means to be a college student going forward. Beyond the perks of credit card rewards and counting points, students may be wanting peace of mind and trust in who they get a card from; security from identity theft; and easy to use mobile features.
So wherever your educational journey leads you, consider these six reasons to have a credit card:
Build a Credit History
It’s common to want to only use your student credit card for smaller expenses in the beginning, but understand that you are building a relationship with your credit card company that shows other credit issuers that you are reliable and responsible.
It can be a good idea to pay your bills on time and in full, and keep your balance low. That way, when you’re ready to apply for a higher credit limit or a card with different benefits, you’ll already have a track record as a good credit card customer.
The free Discover credit scorecard shows you an overview of your credit in seconds.
You Can Help Avoid Fraud and Identity Theft
Worried about some scammer stealing your hard-earned cash and trashing your good name? Well, paying with a credit card makes it easier to avoid fraud and monitor unauthorized purchases. Discover Freeze it® allows you to stop any purchases on your card if you lose it or suspect something suspicious. Discover also offers free Social Security alerts as another tool to monitor fraud.
Learn to Budget
Having a credit card as a student can teach you powerful lessons about paying your bills on time and creating a budget. Using a credit card will require you to think ahead to your payment due date, and budget to make sure you have the money available to make at least the minimum payment every month.
Some credit cards allow you to track what you spend and organize transactions by type on their websites and mobile apps, so you can see where your money is going. Learning the skills of budgeting and scheduling bill payments may help you later in life when you’re managing bigger dreams and ly, more money.
Enjoy Rewards and Cash Back
Certain credit cards allow you to earn rewards, points or cash back for a variety of things. For example, the Discover it® Chrome card for students allows you to earn 2 percent cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, automatically, plus unlimited 1 percent cash back on all other purchases.
Another option includes the Discover it® Student Cash Back card, which allows you to earn 5 percent cash back at different everyday places each quarter grocery stores, restaurants, gas stations, rideshares and online shopping (Amazon.com, Walmart.com, PayPal and more), up to the quarterly maximum each time you activate. Neither card has an annual fee.
You Can Handle Emergencies
Cars need repairs. Computers need fixing. Smartphones get dropped. Life happens. It’s reassuring to know that in the event of a real emergency, a credit card can cover expenses. Students can pay for unexpected medical or dental expenses, or even rent a car with a credit card. This benefit might help you — and your parents — feel a little more secure.
Renting or Buying a House or Apartment
Most rental applications require a credit check. A student credit card with a strong track record of repayment can help identify you as a responsible young adult and potential good tenant, helping to strengthen your rental application. When you’re ready to buy a home, a strong credit history will also be key to getting a mortgage.
Originally published July 13, 2015.
Updated July 20, 2020.
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The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service.
It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.
Chrome Disclosure: You earn a full 2% Cashback Bonus® on your first $1000 in combined purchases at Gas Stations (stand-alone), and Restaurants each calendar quarter. Calendar quarters are defined as the three-month periods beginning January 1, April 1, July 1, and October 1.
Purchases at Gas Stations and Restaurants over the quarterly cap, and all other purchases, earn 1% cash back. Purchases made at Gas Stations include only merchants in the category that sell automotive gasoline that can be paid for either at the pump or inside the station.
Gas Stations affiliated with supermarkets and supercenters may not be eligible. Restaurant purchases include only those made at merchants classified as full-service restaurants, cafes, cafeterias and fast food locations. Certain digital wallet transactions qualify for 2% Cashback Bonus, for more information see Discover.
com/digitalwallets. Purchases made through third-party payment accounts, mobile or wireless card readers, virtual wallets or similar technology will not be eligible if the technology does not provide sufficient transaction details for rewards qualification.
2% Cashback Categories: In accordance with standard industry practices, merchants are assigned a merchant category code (MCC) typically their line of business, or the type of products and/or services they primarily sell or provide. Discover Card does not assign MCCs to merchants.
Even if you make purchases at a merchant of items that appear to fit in a rewards category, the merchant may not have an assigned MCC in that rewards category. Only purchases made from merchants located in the United States are eligible for 2% Cashback Bonus.
In order for a purchase to qualify for the 2% Cashback Bonus Program, the transaction date must be before or on the last day of the offer or promotion. Rewards are added to your Cashback Bonus account within two billing periods. See Cashback Bonus Program Terms and Conditions for more information about your rewards.
Applies to all categories: Certain digital wallet transactions qualify for 5%, for more information see Discover.com/digitalwallets.
Purchases made through third-party payment accounts, mobile or wireless card readers, virtual wallets or similar technology will not be eligible if the technology does not provide sufficient transaction details for rewards qualification.
5% Cashback Categories: In accordance with standard industry practices, merchants are assigned a merchant category code (MCC) typically their line of business, or the type of products and/or services they primarily sell or provide. Discover Card does not assign MCCs to merchants.
Even if you make purchases at a merchant of items that appear to fit in a rewards category, the merchant m ay not have an assigned MCC in that rewards category. Only purchases made from merchants located in the United States are eligible for 5% Cashback Bonus. Rewards are added to your Cashback Bonus account within two billing periods. See Cashback Bonus Program Terms and Conditions for more information about your rewards.
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