For many college-bound freshmen heading to the University of Maryland or any other institution of higher education, learning how to budget and become responsible with handling money on their own can be challenging enough. Building a credit history during that time brings with it an additional layer of potential difficulty. Too many students open a credit card before they can fully understand the long-term impact it could have on their credit report, so it’s important for them to start building a positive credit history from the get-go. Here are five ways college students can avoid the most common mistakes that can jeopardize their credit score.
- Be Conservative with that Card
Building a positive credit history takes responsibility. So while it may be tempting to make some purchases with it, the more you use it the more you’re spending. That’s when your financial situation can start to spiral out of control. Therefore, be conservative and only use the card in emergencies and dire necessities. Running up a high balance or even maxing the card out in the first few months you have it is so incredibly easy to do (and potentially damaging), unless you’re very careful about your purchases.
- Do Use the Card
Conversely, if you use the card too infrequently or barely at all, the credit card issuer might try to close it down. You can’t build proper credit without using any of it. So keep those purchases to a minimum but do spend some money on occasion. Stay away from making large expenditures on pricey items like electronics or fancy toys, but instead use the card to pay off some monthly bills or subscriptions. Use it for your cable or some other utilities that you need to pay each month. That way there are a couple of monthly charges on the card but you’re not spending extravagantly either.
- Pay Your Bill in Full
The best way to build good credit on your first card is to keep current on your monthly payment. Taking care of the balance in full each month will put you in good standing and it’ll save you money on those annual percentage rate (APR) fees which will begin to accrue the longer you keep a balance on your account. This is why you want to keep those purchases to a minimum, so that it’s easier to pay your credit card bill in full.
- Do the Same with All Your Bills
Credit bureaus don’t just take your credit card into account when calculating your score. They look at all of your financial obligations. So be sure you’re on top of your finances all around and pay those other bills off on time as well. Some of the bureaus take things like utilities, rent payments, even things like traffic fines into account for your score. As long as you stay on top of it all, you’ll do just fine.
- Just Get One Card
You’ve gotten your first card, you’ve been responsible with it, and now you think it’s time for another one. Slow down. One of the easiest ways to ding your credit score is by applying for too many cards at once. If you’re still establishing a credit history, taking on more cards will actually hinder instead of help your cause. When the credit bureaus see someone who’s never had a card before or had one for just a few scant months applying for multiple accounts, they see it as a red flag and it can lower your score. Take it slow, establish yourself first, then you can open another card later on.