How to Build Credit as a Student

Building credit as a college student can be challenging, but not impossible. Here are some simple ways to build credit while in college and set yourself up for life after graduation.

Report your Rent Payments

In the past, rental payments were not factored into credit scores. However, with the availability of rent-reporting services, you can now enjoy the benefits of having your timely rent payments reflected in your credit score.

To ensure the accuracy of information, it is advisable to conduct further research on rent-reporting services and determine which product suits your needs. These services come in various forms, including free options that tenants can use and those that landlords automatically provide.

Become an Authorized User

If you're having trouble getting approved for a credit card, consider becoming an authorized user on someone else's account. You can ask a trusted family member to add you to their credit card account. Make sure the account you want added to has a good repayment history and a low utilization rate before proceeding.

Becoming an authorized user is a great way to build your credit score without going through a credit check. Once you are added, the account's payment history will be reflected on your credit score. This credit-building option can help you establish a positive credit history when used responsibly.

Use Credit Strategically

It's never too early to learn good credit habits, whether you're just starting or have no credit history. If you have been approved for a credit card, it is advisable to keep your credit usage well below the maximum limit. To build your credit score, it is recommended that you use only 25-30 percent of your available credit limit. This will help you establish a strong credit history and improve your chances of approval for future credit applications.

• Pay Your Bills Set up automatic payments to avoid accidentally missing a payment. This will ensure your bills are paid on time, hassle-free. A good payment history is crucial for your credit score. We recommend paying your bills on time, paying more than the minimum balance, and ideally paying the entire balance each month.

• Limit Your Usage Avoid impulse purchases by refraining from non-essential credit card spending. Accumulating excessive credit card debt can be easy if you don't have a repayment plan. Consider your credit card a resource to be used only in emergency situations. It's crucial to remember that the more you spend, the higher your monthly payment will be, making it more challenging to pay the entire balance in full.

• Avoid Debt Collections When you fail to pay off your credit cards, auto loans, or other financial obligations, they may be sent to collections. This is highly detrimental to your credit report, as it can remain on your credit report for up to seven years. The best way to avoid this is to pay your accounts in full and on time. If you miss a payment, contact your lender or creditor immediately. Explain the situation and pay off the balance as soon as possible.

Consider a Credit-Builder Loan

Although not all financial institutions offer this option, opening a credit-builder loan can help you establish a good payment history quickly.

When you take out a credit-builder loan, the lender won't immediately give you the loan amount. Instead, they will keep the loan amount in a separate savings account, which usually ranges between $200 and $1000. Like other loan agreements, you will then start making monthly payments, including the principal and interest.

The loan term can vary from six to 24 months, depending on the borrowed amount. The lender will report your payments to the credit bureaus. Once the loan term is complete, you will receive the borrowed money.

Developing a strong credit history requires patience and time. It is advisable to start the journey as soon as possible to reap the benefits after graduation.