Encouraging responsible credit practices is absolutely critical for any student, especially one who is in need of his or her first credit card. Since every student’s goal should be to depart college with a degree, a good credit score, and as little debt as possible, we have a few simple tips for building and maintaining a strong credit score during college and beyond.
Secure the Right Credit Card
In order to build a strong credit score, you first have to demonstrate that you are capable of using credit responsibly. Simply avoiding debt and eschewing credit cards will actually make you appear to be a greater risk, so securing a credit card is the logical first step to earning an impressive credit score.
Of course, you have to make sure you secure the ideal credit card for your purposes, which is ostensibly to build up your credit score. This means you should avoid any card with a high interest rate or one that includes annual fees. Since your options may be limited due to your lack of credit history, you can start with a student credit card or a secured credit card from a credit union.
Use Your Credit Card Responsibly
The potential for irresponsible spending is the biggest risk associated with a credit card, so make a commitment to using your credit card responsibly. In other words, your credit card should be used sparingly enough that you are able to pay off the balance in full at the close of each statement period.
Designate a specific and necessary monthly expense and use your credit card for this expense with the understanding that the balance must be paid off before any interest accumulates. Groceries or utility bills are common examples, and you have to avoid the temptation to use it on frivolous expenses that will push you closer to your credit limit.
Develop Accountability Strategies
Using a credit card for the first time is not easy, and mistakes are indeed commonplace. If you are serious about building a strong credit score and maintaining that score, consider putting some accountability strategies in place.
Use a site such as CreditUpdates.com which allows you to access your credit report so you can review how your behavior affects your credit, and it also offers credit monitoring and fraud resolution services that are invaluable to a college student.
In addition to closely monitoring your credit through their site, you can also ask your parents to hold you accountable for your credit card use every month. There are many methods for doing this, including sending them a copy of the monthly statement at the close of each billing period. Knowing that someone will be reviewing your credit card use at the end of each month will go a long way toward preventing irresponsible spending habits while also strengthening your overall credit score.
Pay Your Bills Early and In Full
Your goal should be to never carry a balance with your credit card, so make a point to always pay the full balance of your credit card bill at the end of each month. Your credit score is affected by how much credit you have available relative to how much debt you have accumulated, so carefully managing your credit card balance is especially critical.
If you plan on sharing a rental property with roommates, make sure they are financially responsible and understand what is expected of everyone sharing the rental property before making any kind of commitment. Shared living arrangements are complicated enough as it is, so take the time to discuss finances and expectations regarding rent and other shared cost-of-living expenses.
You should also make sure you have thoroughly outlined how utility bills will be paid each month and designate a specific bill to be put in each roommate’s name so that everyone is held accountable for contributing on time each month. Utilities and other bills that are paid late will have an adverse effect on your credit score, so do not put yourself in a position in which an irresponsible roommate causes harm to your credit score for years to come.