Credit & Credit Cards

Becoming financially independent 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 affect whether you get a job.  Building good credit takes work, but it can be done.  Find out how you can build a good credit score as well as avoid some of the pitfalls.

Understand what you are signing up for.  Do you know what Annual Percentage Rate (APR) is?  Do you know what an impact credit card interest charges can have on the amount you repay?  Understand the importance of building good credit and learn how to build a solid credit foundation.

10 Ways Students Can Build Good Credit:

  1. Become an authorized user on your parents’ account.  This can help you build good credit via “piggybacking”.  A parent makes the student an authorized user.  If the parent has good credit, the student’s credit gets a boost.
  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.  Just remember, 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 a student is able to qualify for a regular card on his/her own, it’s important to remember that not all cards are the same.  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.   See the Workbook below for tips!
  4. Use the credit card for occasional, small purchases.  Since responsible card use and on-time payments will help you build good credit while discouraging the bank from closing your account due to inactivity.
  5. Avoid big-ticket items, except in case of an emergency.  Keeping your debt levels low will ensure that if there is an emergency expense, you’ll still have plenty of your credit line available, without exceeding your credit limit.
  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.  If you can’t, you are living beyond your means and shouldn’t be making those purchases. 
  7. Pay all your other bills on time.  Think only your credit card affects your credit?  Being late on utility payments and sometimes your rent can affect your credit score.
  8. Don’t co-sign for your friends.  Just like you may need an adult co-signor to get approved for a card, your under-21 friends may too.  By taking on too much debt or missing payments, the co-signor can quickly see their credit ruined.
  9. Do not apply for several credit cards at one time.  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 the years, it will hurt you less.
  10. Use student loans for education expenses only, and pay on time.  Student loans can be a great way to build and maintain good credit if you only borrow what you need to go to school.  When you get out of school, consider Loan Consolidation if appropriate.

Student WorkbookStudent Workbook