How College Students Can Build Good Credit

Back-to-school season is here, which means many students are off to college! Whether they are getting their first taste of the “real world,” or getting ready to take their next big step in life, it’s important for college students to be able to build their credit. 

As one of the best credit repair companies in the Philadelphia area, our team of financial experts has built this quick list of tips on how college students can build good credit. 

Learn How to Use a Credit Card

A proper education is the most important part of being financially successful as a young adult. Many students (and some adults) tend to view a credit card as a source of free-flowing money. That line of thinking will have you sinking into debt faster than you could possibly imagine. In order to establish trust with lenders and build good credit, you have to understand how a credit card works. Here’s the quick rundown. 

The credit card company (the lender) provides you (the borrower) with a line of credit, which is the total amount of money you can borrow from them in one month without overspending. Every time you swipe your card, you use the company’s money to pay for goods and services. You have to pay back this sum at the end of each billing cycle. 

The best course of action is to pay the bill in full. That will absolve you of any debt you racked up during the month and help you boost your credit score. However, if you don’t have access to enough money to pay the total bill, contribute at least the minimum payment. The leftover debt will accrue interest over time. 

Make sure you’re never late on any credit card payments as this sends a red flag to lenders and lowers your credit score. 

This is just a simple review of how credit cards work, but there’s a lot more to be learned, so do some research on your own and talk to your parents as well. 

Find a Cosigner for a Credit Card

Once you understand how credit works and gain a sense of responsibility as a borrower, you may be eager to get your first credit card. It’s an exciting step in your young adult life, but it’s not always an easy hurdle to cross.

The 2009 CARD Act passed by the federal government requires any individuals under 21 years of age to have an income in order to qualify for a credit card without a cosigner. This helps lenders reduce their risk because they know you will have the money to pay them back when the time comes. 

Without an income or a credit history, the only way to get a credit card is with a cosigner, such as a guardian or a parent. 

Consider Other Credit Alternatives

Credit cards aren’t the only means by which you can build credit. There are other credit card options available to people with no credit history.

  • Secured Card: This is like a debit card that helps you improve your credit. You deposit a certain amount of money depending on which bank you choose, and this deposit becomes your line of credit. With a secured card, you can’t overspend, and you have better control over your credit line. 
  • Credit Builder Loan: There’s no easier or better way to save money and build your credit simultaneously. This is a secured loan that is placed into your savings account. Every month, you pay a fixed amount towards repaying the loan. Once you successfully reach the end of the loan term, the money in the savings account is yours. 

Get Ahead of Your Student Loans

Nothing is more burdensome than student loans, so it’s always a good idea to get ahead as far as they are concerned. Instead of waiting until graduation day to worry about paying back your student loans, you can start today and use them to help build your credit. You’ll be thankful for taking this opportunity to get a head start in the future. Contact Philadelphia’s top credit repair experts for more financial advice.