Maximizing credit while in college


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College puts a lot on your plate – from managing your gpa, building a course schedule for next semester or carving out time for campus activities. While many college students will apply for loans to keep them on track toward graduation, few may consider how this will affect their credit or credit-building momentum while studying.

Here’s how you should be thinking about maximizing credit while in college.

Why it’s important to build credit in college

Building good credit early will put you in a better position to make large life purchases in the future. If you ever want to own a home or buy a new car, you will likely need some kind of loan. Your credit score will determine the loan you could be eligible for.

Certified financial planner Matthew Frankel gives this example, “The average APR given on a 60-month new car loan is currently 4.72 percent to a buyer with a FICO® Score above 720. For someone in the next tier (690-719), the average APR rises to 6.044 percent. To illustrate the potential difference, a borrower with poor credit can expect to pay a sky-high 17.147 percent APR for the same exact car loan.”

Your credit score doesn’t only affect your ability to apply for loans, it could also affect your ability to get a job or insurance. A current practice among employers is to do a credit check before hiring a new employee. According to Frankel, better credit is thought to have a correlation with personal responsibility and trustworthiness. Insurance companies view a high credit score in a similar way, seeing it as proof that someone presents a lower risk for getting into an accident.

What is a good credit score to reach while in college?

Your future credit score needs will depend on what you intend to do after you complete your studies. For more substantial purchases, it’s ideal to have a substantial credit file showing at least three lines of credit. However, if you are looking to continue your studies, you may only need a high enough score to rent an apartment or get another loan to cover school bills.

According to, a good FICO score falls between 630 and 739 points. And according to Experian, one of the three credit reporting bureaus, it takes three to six months to establish enough credit history to have a credit score. From there, your FICO score can continue to grow if you are mindful of the five credit factors: credit utilization, credit history, payment history, new credit and credit mix.

Ways to build credit while in college

The first step to building your credit is knowing where you stand. You’re entitled to a free credit report every year, and Bankrate offers a free credit report tool that will show your updated score on a weekly basis. You can also get notifications when there are changes to your report that need to be addressed. This way, you can keep track of how well you are building your score.

Here are some other things to do to build your credit:

Open a checking account:

This may not count towards your credit score, but most card issuers will want to know if you have a bank account. Once you’ve established a good relationship with your bank, check to see if you are able to open a line of credit there.

Become an authorized user:

Talk with a trusted cardholder to see if they can add you to one of their accounts as an authorized user. This will allow you access to an established account to help you build your credit score. An added bonus is that you don’t have to use the account to build your credit.

Get a credit card:

If you have no credit history, look into starting with a secured card or a student credit card. These are cards that will allow you to build credit with less pressure, by acting just like a debit card. Make sure that you have the cash to pay for any purchases you make using it. Try to pay off your bill every month to avoid accruing debt on your card.

Manage your student loans:

If you are using loans to pay for your schooling, those payments will factor into your credit score. Before you even accept a loan, make sure you are only taking as much as you need. Keep up with your monthly payments. If at any point you feel like you can’t do so, contact your lender to see what accommodations can be made.

Don’t go overboard:

Each time you apply for credit, you initiate a pull on your credit report. This can have a negative affect on your credit score. Try to only apply for credit as you need it, and always use it responsibly. Late payments also have a negative affect on your score and can stay on your credit report for seven years.

Pay all bills on time:

If you have a car note, a cell phone bill or pay rent, you can build your credit score by paying them on time. Any bills that you pay on a regular basis can be used to build your credit score. You can tap into a service like Experian boost to get started.

The average starting credit range for a college student

Your average starting credit depends on what kind of credit line you have open. If you have something like the Discover it Student Cash Back card, your line of credit will be at least $500. With a secured card, your line of credit is often attached to the amount of your security deposit. For example, if you make a deposit of $300 onto the Citi® Secured Mastercard®, that will be the amount of credit you have available. Other cards like the Capital One® Secured Mastercard® offers a line of credit of $200 for a deposit as low as $49.

With responsible use, these types of cards are meant to give people who have no credit history or poor credit history something to build on. Once you’ve established a higher credit score, you can apply for other kinds of credit cards that will vary in credit range.

Bottom line

Some people may think 18 a little too early to worry about finances, but it’s actually a great time to lay the groundwork for your financial future. By starting small and being consistent in college, you can create a solid enough credit history to help you prepare for what comes next.