The College Student’s Guide to Building Credit

College may be the first time many young adults find themselves managing their own money. Whether it’s helping pay for their education, contributing to rent in a student apartment, or simply budgeting funds for a meal out, many financial lessons are learned during the college years. But one crucial, and perhaps overlooked, lesson is the importance of building and maintaining good credit – as a student and beyond. Here are three things to consider if you’re a college-aged student looking to build your credit.

How Do You Establish Credit?

While we all know having good credit is important, it can be difficult to know the best ways to get started on the right path, especially for a student who may be new to the world of personal finance. Beginning to build credit as a student can assist in many areas, like being approved for a credit card, renting an apartment, or applying for a car loan.

The easiest place to start building credit is with a student credit card. Credit card companies target students with special offers to apply for credit cards, so being approved for a starter level card should not be difficult. Before blindly accepting an offer, it is important to evaluate the benefits of various cards and determine which best fits your needs. A good entry level credit card would have no annual fee and ongoing rewards like cash back on purchases.

What Impacts Your Credit Score?

One of the biggest factors that impact your credit score is your payment history. Starting to build your payment history as a student will go a long way in establishing a good score. A valuable way to implement this is to set up automatic payments each month so that the balance of your credit card is paid off with each statement.

Another area that impacts your credit is your usage, or utilization, rate. Your usage rate is determined by how much credit you have utilized divided by your total available credit limit. Keeping a usage rate of 30% or lower will positively impact your credit score. For example, if you are approved for a credit card with a $5,000 limit, keeping the amount of credit used to $1,500 or less should be your goal.

Your payment history and credit utilization rate accounts for over half of your credit score! Focusing on these two areas is a reliable way to begin building a respectable credit score. Try charging things that are expected expenses, like gas or a streaming service subscription. That way you’ll be able to make consistent monthly payments while keeping your usage rate low.

Pitfalls to Avoid

One of the biggest pitfalls to avoid for new credit card users is carrying a balance for an extended period. Credit cards are accompanied by high Annual Percentage Rates (APR) that can range from the high teens to upper twenties. Carrying a balance will result in high interest charges that are unnecessary and will negatively impact your financial situation.

Avoid carrying a balance on your credit card by sticking to a low utilization rate. Only charge things you know you can pay off at the end of the month and don’t think of your credit card as “free money.” You’ll have to pay it back eventually – even more than you originally charged if you’re paying high interest!

If you’re just starting out on your credit-building journey, you can receive a free annual copy of your credit report by going to and completing a request. This will allow you to understand the information each credit reporting agency has received about you and confirm its accuracy. While it will not include your credit score, it will include all the information that goes into determining your score.

There are several third-party sites that will allow you to check and track your credit score for free so you know where you’re starting point is – and a potential goal for yourself moving forward.

Financial decisions throughout your college years can follow you well into adulthood. Keep these tips in mind when managing your money and credit while at a university. With the right planning, you’ll leave college with not only with a degree, but a strong credit rating.


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