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Building Credit on a College Budget

Building Credit on a College Budget
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Building a solid credit score can be difficult—especially so, for a full-time college student.  Of course, it’s nearly impossible, without steady income. If you wouldn’t be able to pay off credit card balances–or any other type of loan—what follows may be of little value to you. Our best advice is to turn them down.

College students are prone to taking on high levels of debt. They juggle student loans, with, for the most part, only part-time work at best. Even so, doing everything you can to begin establishing a good credit rating is extremely important. The effects may last the rest of your life.


Student Credit Cards

Banks offer special student credit cards with low credit limits, lower interest rates, and more forgiving terms than other types of credit cards. They may lack some of the “bells and whistles” of the credit cards that middle-income earners carry, but they  can allow you to build your credit. If you choose to obtain one or more of these cards, make sure to use them responsibly. Don’t spend more than you can afford, since this can easily backfire.

Pay Off Student Loans

Student loans might be essential to getting through college, but repaying them also can help build your credit. (There—does that make you feel a little better about making that student loan payment every month?) By paying off your loan on time, you will show lenders that you are a good risk, and your credit score will improve.

Get Store Cards

Cards issued by particular chain stores, such as Macy’s, are available, backed by credit card companies or banks. If you shop frequently at a particular store, a store card might be a wise choice. Be careful not to apply for too many at once, as this can hurt your credit rating. Also, many stores take both their own store cards, and VISA and MasterCard. In such a case, if you have more than one card, it might be worth your while to compare rates, terms, and outstanding balances before deciding which card to use for a particular purchase.

Pay Bills on Time and Balances at the End of the Month

Try not to miss any payments. Before you reach the point that you simply can’t make even a minimum payment due,  rethink your budget. Even making only the minimum payment month after month can hurt your credit rating. It suggests that you may be unable to pay your balances off.

Join Together With a Successful Credit Card User

By becoming an authorized user on another person’s credit card account, you can start to build responsible spending practices. The cardholder will be able to monitor your spending  and advise you on the proper methods to pay off your balances at the end of the month.

Secured Credit Cards

If you are unable to obtain an unsecured credit card, a secured card may be right for you. Secured cards require a cash collateral deposit, which becomes the credit line for that account. So, if you want a $500 credit limit, you would pay the $500 up front to the credit card company—but nobody else would know that you paid in advance. The good news is that your monthly payments will be reported to the major consumer reporting agencies, helping develop your credit rating.


By making on-time minimum payments to all creditors, and maintaining account balances below credit limits, a secured credit card, combined with responsible financial behavior, may help you establish or rebuild your credit history.

Avoid scams, giveaways and free offers

Banks have found over the years that pressing college students into signing up for credit cards is quite lucrative–and almost impossible for many to resist. The decision to sign up for a credit card should be done calmly and thoughtfully, not in the hustle and bustle of a college campus.

Often, the offers you receive on campus are worse than the ones you might be able to get by doing some comparative shopping. If a credit card company hands out “free” shirts or other gimmicks, you can be sure they are building the cost into the fees and interest rates you pay on their card.

Attending college should be a time of learning and growing into an adult. By acting responsibly, you can set yourself on a path to a successful credit history and rating.

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