6 Ways to Establish Good Credit in College
While in college, setting yourself up to earn in the future is one of your top goals, and setting yourself up to borrow should be a goal too! If you ever want high limits on a credit card, the ability to take out a loan, the flexibility to lease or finance a car, or the ability to rent an apartment without mom’s signature, you need good credit in your name.
Use the extra freedom – and responsibility – in your college years to start establishing your credit score. Here are 6 steps to take while in college to establish your credit.
Get a job
Loans are not income, they are debt. To be eligible for credit, you want to have an established, steady income from a real employer (under the table and summer jobs don’t count), with a paycheck that goes into a bank account in your name. Even if your schedule is difficult, it can really pay, literally and figuratively, to work 10-20 hours a week for an established retailer, office, or other workplace at or near your school.
Get your parents to co-sign on a credit card
Credit cards are the best way to build your credit rating while in college, and can be quite handy in deferring costs or making purchasing simpler. The Credit Card Act of 2009 made it so you need a parent’s signature on your credit card under the age of 21. You can still get one, and doing so and being extremely responsible about how you use it while you are still “underage” can seriously boost your credit score.
Make sure you use your card for small purchases in the beginning, and pay off the entire balance each month. Use it to pay for expenses you were taking out of your bank account anyway, like your monthly cell phone payment.
Your parents can add you to their account, establishing a credit card in your name. They can co-sign or apply for one for you as well. Cards with special rewards and perks for students to try include:
- Capital One® Journey Student Credit Card gives 1% cash back and 25% bonus on the cash back you earn each month you pay on time. It is a special reward to teach responsibility! It also increases your credit if you make 5 monthly payments on time, and it has no annual fee.
- Discover it® Chrome for Students gives $20 cash back each year a student’s GPA is 3.0 or higher, doubles all rewards in the first year, and gives an extra percentage point rewards for common student purchases of gas and meals.
Pay for reimbursable expenses on your credit card
Maybe you don’t have much money, but you work with campus organizations that have budget. You find yourself paying for things with your student loans, and getting reimbursed. If you place large purchases you were going to make anyway or that can be reimbursed quickly in the future on your card, you will build credit quicker. For examples:
- Your books and tuition that your loans pay for.
- Your student club’s fundraiser expenses from the local Home Depot, which you know will be reimbursed from your treasury before your bill is due.
Get a store card
If a credit card seems like a big move for you, try a smaller step first! You can apply for a gas card or a credit card to your local Walmart, for example, to make purchases you were going to make anyway and help build your credit slowly over time. This also can help if you are turned down for a major credit card.
Pay your bills on time!
A great way to ruin credit is to put the utility bills for the apartment you are sharing with 3 other friends in your name and then not pay on time. Somebody has to set up those accounts for the Internet, the heat, the water, the cable, etc. If they are in your name, good for you for taking the responsibility, but make sure you pay them on time! Utilities will report you to the credit bureau for not paying, with no credit score benefit for paying on time unfortunately.
Co-sign on a loan
If you need a car, buy a modest one and co-sign with your parents or an older sibling. Paying it off responsibly, each month on time with the minimum payment or more will greatly improve your credit rating. You can also take out a small personal loan for a major purchase you need, such as a new computer.
Take this time now while you are still a bit removed from the “real world” to prepare yourself to live well while in it! Establishing your credit score in college will help you tremendously after you get your degree, and can be done relatively easily with good sense and fiscal management.