Credit is an essential part of life. It helps you take out loans, which can help you get a house or a car. Credit needs to be established, but building credit during college can be tricky.
What happens when you graduate college and try to make big money moves but have nothing to back it?
Let’s not have that happen. Building credit starts with having a line of credit during college. That way, you can come out of college financially swinging.
Payment History
Building credit doesn’t have to involve accruing enormous debt. Take care of the payments you already have. Put your payments with deadlines at the top of your priority list, and you can avoid a lot of financial woes.
Building this habit is the best thing you can do for yourself. The primary way your credit gets docked is by not making your payments on time. Credit is the rating on your financial forehead that tells people how trustworthy you are.
Share A Card
Becoming an authorized user on a parent’s credit card is a great option. This means your parents control the card use and can still pay in time of need. You get to use it and make payments, but you have better supervision while you get the hang of the whole credit thing.
Let’s say one month you forget to make a payment. Your parents can see the activity on the account and help correct you. That’s much better than your credit tanking without you knowing because you made mistakes on your own.
Credit is not something you want to learn the hard way.
30% Rule
The 30% rule is something you should always have in your mind as long as you have a credit card. It’s simple: DON’T SPEND MORE THAN 30% OF YOUR LIMIT. This seems pretty low, but more debt on your account will start to dock your credit if you’re not careful. Try to keep your balance due at the end of each month ⅓ of the limit on your card.
Once you maintain your balance to this rule and consistently make your payments on time, you will have the opportunity to increase the limit on your card. So be patient.
It’s Just Another Debit Card
Another rule you have probably heard, but should really listen to: treat your credit card like a debit card. This is a great rule to ensure you never run into debt problems, which are credit problems.
Always check your banking accounts (which is already just a great idea) for what you can pay. The credit card is not a get-out-of-jail-free card if you don’t have the money to make the purchase. Wait until you have the money to back the purchase.
An easy way to do this is to only use your credit card for small, consistent purchases you make in your budget already.
Don’t Start A Collection
Be careful when you apply for credit cards. Different companies have different interest rates and rules that could dock your credit without you knowing. The important part is to do your research before you make any moves. Too many applications for credit cards can dock your credit a bunch.
Make sure you really want the card and qualify for it before applying. This will keep your list to a minimum and your credit score to a maximum.
Take Small Steps
You can do this! Credit can seem like a daunting thing, but take it step by step. You’ll find that a few simple rules can keep you on track for establishing credit while in college.
Take the little steps needed to get yourself started. Building credit doesn’t have to be complicated!
