 Dear Dr. Don,
I am a college student and I wanted to start building a credit history. I currently have absolutely no credit. What is the best credit card to get in order to build credit fast?
--
Josh Jump-start
 Dear Josh,
Just as a respected college degree doesn't arrive overnight from a diploma mill, a good credit history takes time to build as well -- although it won't take four years.
The time-tested approach of becoming an authorized user on your parent's credit card doesn't work anymore. The credit-scoring models no longer consider an authorized user's payment history in calculating a credit score. That's because people with bad credit were gaming the system by piggybacking on other people's good credit histories by arranging to be an authorized user on an account. Credit card providers extend credit to college students (despite the fact that the applicants don't have an established credit history) because they are trying to build brand loyalty. The idea is that once you start your career, you'll remember the company that gave you credit when you had none and you'll stay loyal to that card. Don't fall for the free beach towel promotion at the student union. Use Bankrate's
advanced credit card search feature to compare the different student cards.
Don't apply for multiple credit cards at one time. It makes you look desperate for cash and lenders hate lending to desperate people. Every time you apply for credit, it creates a "credit inquiry" on your credit report. An inquiry stays on your report for two years, but only impacts your credit score for the first year. Wait a year before deciding you want a second card. Remember that you're doing this to build a credit history. To do that, you need to make timely payments for at least the minimum payment amount. Also, don't use more than 25 percent to 50 percent of the credit line at any point in time. Late pays and missed payments are like shooting yourself in the foot when it comes to building a credit history. |