Good credit can open so many doors for you. It means you pay less for the things you want the most. A high credit score makes lenders more likely to give you loans and credit cards with low interest rates and spending perks. Life just seems easier when your credit score is high. But what most college students don’t know is that they can doom their scores from the outset through poor financial management. Many of them just aren’t ready for the responsibility that comes with building good credit. So it’s essential that college students pay attention to the damage they could be doing to themselves for years to come through their credit score. Start now to build good credit and you’ll be glad you did when you hit the real world.
Piggybacking
Many students start building up a positive credit history by “piggybacking” on their parents’ credit. This is done through being added to a parent’s credit card or other account as an authorized user of that account. Parents with excellent credit can then help their child’s credit in the same fashion. Just be sure not to ruin your parents’ good credit by being irresponsible with it. You can also apply for your own card but the credit card companies will require a parent to co-sign for that card if the applicant is under 21. This is also a good way to get started on establishing good credit early on.
Pay on Time
Due dates are a very important component of building good credit. Making sure you meet your financial obligations when they are due is the quickest way to a high score. If you open a credit card, then pay off that balance every month. Avoid the dreaded “minimum payment” at all costs. While it may seem like the card companies are doing you a favor by letting you pay down a portion of your balance each month, they’re not.
Your card has an annual percentage rate (APR) that kicks in when you carry that balance. You’ll be accruing interest that will add more money to your monthly bill and will continue to do so the longer you have a balance on the card. It’s not just your credit card bill either, all of your bills, particularly student loans or any other such obligations, will be counted on your credit report and assessed negatively with late payments. Pay your cell phone bill on time, your cable bill, anything that goes unpaid, or even worse goes into collections, will dramatically reduce your score. Pay on time, you’ll have nothing to worry about.
A Word about Loans
Student loans are often necessary for college-bound individuals to get an education, whether they’re taking classes on campus or going through UAB Online. These loans are not for everything though, so be sure you keep the lending to a minimum. Being responsible about student loans is a smart way to stay on top of your credit score.
Avoid getting a loan for something like a car or other big ticket items that have nothing to do with getting an education. The more money you borrow early on, the more of an obligation you’ll have to shoulder and that can be tough to navigate properly. Loans require a lot of responsibility and unless you are absolutely certain you will have the resources to meet the monthly payments, on time, then you may want to avoid getting one for anything beyond going to classes.
