Going off to higher education is an incredibly exciting time for a young person. For many, it is the first time they will be living away from home, being totally independent. While obtaining a degree can really help with career prospects, many students still leave with little preparation for the outside world, such as leaving without any form of an established credit history.
Credit scores are very important as they primarily determine your eligibility for financial products, such as loans and credit cards. As such, it is certainly worth trying to build up your credit while still in higher education so that you can enter into the workforce with a good credit score.
This article will outline some top tips to follow as a student that can help you to build up your credit score.
Ask to be Added as a Credit Card Authorized User
This is a great way to build up credit while studying. You can ask a parent or family to add you as an authorized user to one of their existing credit card accounts. This means that you will then receive your own credit card and have access to this account and its credit limit.
Authorized users do not have any legal responsibility to pay off the credit card debt themselves so the application process is fairly simple and straightforward. Not every credit card company or bureau will allow for authorized users so it is important to check with them first.
As soon as you have been added as an authorized user, then you should see an immediate chance to your credit score.
Apply for a Student Credit Card
Many credit card companies will offer specific credit products designed for students wanting to build up their credit. Using a student credit card will allow you to build up a good credit score whilst also learning good credit and spending habits.
Usually, no previous credit history is required when applying for a student credit card card too so it is a great option for those starting off on their credit building journey.
Apply for a Regular Credit Card Through a Co-signer
You may also opt to apply for a traditional credit card, which may suit your needs better than a student credit card. While you cannot be approved for a regular credit card if you do not have an established credit history, you are able to do so if you have a co-signer on your application.
A co-signer must be made aware of the risks of doing so – primarily that they will be legally responsible for the credit card debt if it has not been paid.
Frequently Check Your Credit
It is important to regularly check your credit, especially so that you can see if any progress is being made in relation to your credit score.
According to the US Fair Credit Reporting Act, every US adult has the right to one free annual report from each credit bureau. As such, you can request your credit report annually. This will only stand as a soft credit check too so your credit score is not harmed by requesting this.
Maintain a Perfect Payment History
A key part of a good credit score is a perfect payment history. This is because payment history accounts for 35% of the calculation towards your credit score. As such, you must practice good credit habits throughout your time in higher education. This includes making sure all payments, such as monthly phone bills are paid off in time. This will contribute towards building up a good credit history.
Credit cards can be used in this case for consistent expenses, such as fixed bills or contracts. Debit cards could be used for alternative spending such as food shopping and socializing.