How to Build Credit in College: 7 Essential Tips for Students

A good credit score can help you rent an apartment, qualify for car loans, and even land a job. But how can you build credit in college? And why does building credit matter?

Credit is your ability to borrow money. College students rely on credit to take out student loans and charge expenses on a credit card. Credit can also shape life choices and financial opportunities after graduation.

Your credit history is part of what determines your credit score — a history of on-time payments equates to a good score. A good credit score can also mean lower interest rates on private loans, car loans, and mortgages, which can add up to thousands in savings.

Fortunately, college students can take a few simple steps to establish credit and build a good credit score while in school. Here are seven tips for building credit in college.

Your credit score depends, in part, on the length of your credit history. The earlier you start establishing credit, the faster you’ll earn a good score. To start accumulating credit history, you can establish a line of credit by opening a credit card or taking out a loan.

Before you start signing up for every credit card offer you get in the mail, be wary of a few pitfalls when building credit. For example, many predatory credit lenders will have a lot of hidden fees and massive interest rates.

The way you use your cards can also have a negative impact on your credit score. For example, missing a credit card payment can significantly damage your credit score. Keeping a high balance on your credit card can also negatively impact your score. Try to keep purchases on your card to around 30% of your credit limit at the most, and pay off your balance every month if you can.

Beginning your credit journey can be a catch-22, banks and credit unions won’t always offer you a credit card if you don’t have any credit history yet. But how can you build credit history if no one will give you a credit card? That’s where the authorized user feature comes in handy.

By becoming an authorized user, you are added to an existing credit card account. This allows you to piggy-back off someone else’s credit history and card activity.

Consider asking a parent or guardian to add you as an authorized user to one of their credit cards. Even if you never charge a single payment, authorized users get a credit boost from being on the account. However choose wisely whose account you join. Your score can be negatively impacted if the account holder misses payments or carries a heavy balance.

Only certain credit cards report authorized users to the credit bureaus. While other credit cards might add authorized users, they won’t help your credit score.

Alternatively, you can ask someone to co-sign a credit card. However, that puts their credit on the line should you miss a payment.

A secured credit card helps college students build credit with little risk.

How does a secured credit card work? Instead of opening a line of credit, you send money to the credit card company to add to your account. Much like a debit card, you can only spend money you’ve already deposited onto the card.

Students with no credit history can often qualify for a secured card. And it can be a great first credit card for students worried about overspending, since secured credit cards only let you charge as much as you deposit.

Credit card companies realize that college students often have little or no credit. That’s why they offer student credit cards designed for people without much credit history. Students who might not qualify for a regular credit card can often open a student credit card account.

While these credit cards help undergrads build credit, they often come with a lower credit limit and higher interest rate. Once you increase your credit score, you can shop around for a better card.

Let’s say you already have a credit card. What’s the next step to help build your credit in college?

Consistently paying your bills on time will go a long way toward boosting your credit score. That’s because credit bureaus track your payment history. A late payment hurts your credit score, while a record of paying on time helps your score.

Better yet, pay your bills off in full every month. You can avoid paying interest and racking up debt by making sure to pay off your credit card monthly.

Most college students graduate with student loan debt. Fortunately, paying down your student loans can boost your credit. As with credit cards, making monthly payments on your loans shows that you’re a trustworthy borrower.

You can even make student loan payments before graduation. Paying off interest while in school adds to your credit history. It can also save you money down the line.

What about when you pay off your student loans? Your credit score might take a temporary dip, since a nearly paid-off loan helps your score. But the record of paying off the loan will stay on your credit report for 10 years, which can boost your credit long term.

It’s important to regularly monitor your credit cards to identify any fraudulent charges. And it’s also a good idea to check your credit report at least once a year. Your credit report lists all the credit cards, loans, and other forms of credit in your name. It also includes your payment history.

Fraud and identity theft can cause major credit problems. Under federal law, you can receive a free credit report from the major credit reporting companies every year. Review the report to make sure the information you see is correct.

DISCLAIMER: The information provided on this website does not, and is not intended to, constitute professional financial advice; instead, all information, content, and materials available on this site are for general informational purposes only. Readers of this website should contact a professional advisor before making decisions about financial issues.