Building Good Credit in College

a college library

photo credit: Unsplash/Davide Cantelli

Set Yourself up for Success

Trust us, we know that when you’re in college building good credit might be the last thing on your mind. But take it from our intern, Merrick Chely, that college is the perfect time to set yourself up for financial success. Merrick details why you need a stellar credit score and how to get it.

Merrick’s Take

Being a college student is a full-time job. As a Business Administration major, school tour guide, and member of student government, I spend upwards of 20 hours a week going to class and studying, and another 10 hours a week doing extracurricular activities. I participate in all of these activities so that I can better prepare myself for life after graduation, which I hope will include going to graduate school, getting my dream job and moving to a new town.

With these lofty goals, I know that having good credit will be the key to my success. Trust me, I know that college is overwhelming, and thinking about your financial future is just another thing to add to the giant pile. But a little planning now can save you a lot of heartache in the long run.

Here are three tips for building good credit as a college student.

Know Your Credit Score

Lenders are investors in your future; they need to know that you will be able to pay their money back. If they don’t see that you’re a reliable person, they might question whether you are worth their investment. Your credit score is like your GPA. Just as a high GPA shows that you work hard, get things done on time, and are trustworthy and organized, your credit score shows that you are responsible, reliable and good at balancing your priorities.

Your credit score is calculated using information that also appears on your credit report, such as the amount of credit accounts you have open, how long they’ve been open, and how much credit is available for you to use. It essentially provides a snapshot of your credit history in a single number, which lenders use to assess if you are a risky investment. There are many different types of credit scores, but the most common is the FICO score, which ranges from 300 to 850, with 300 being very poor, and 850 being excellent.

Get a Loan or Credit Card

Many people shy away from credit cards because they think they need to pay interest no matter what, but this is not the case. When starting off, make sure that you have the money in the bank to pay for whatever you purchase with a credit card. This will ensure that you always have the money to pay off your balance, and keeps risk at a minimum.

The best place to look for your first credit card is online, where you can compare many different cards in order to get one that suits your needs. You may want to consider asking your parents to co-sign on your first card, giving you extra security if something goes wrong. For a loan, try your local bank or credit union, or go to studentloans.gov if you are looking for a loan to help pay for college.

Check Your Credit Report

Lenders and landlords use your credit report when determining whether to give you a loan or rent you an apartment. Credit reports show the details of your credit history, including your credit accounts — such as credit cards, home loans and auto loans.

The report shows which accounts are in good standing or past due, whether you have any history of bankruptcy or unpaid bills, and personal details like your current and former addresses, job history and Social Security number.

You can access your credit report once a year from each of the three credit reporting agencies (Equifax, Experian and TransUnion) at AnnualCreditReport.com. Rather than pulling from all three agencies’ credit reports at the same time, you can stagger your reports by pulling from a different agency on a rotating basis every four months.

When you receive your credit report, verify your personal details, and look for inaccurate or outdated information. If something seems out of place, report it to the credit reporting agency immediately in order to correct the mistake.

Thinking about your credit while you’re still in college can be tough. But it’s important to start building a strong foundation now in order to ensure that when you graduate, you will be able to get off on the right foot financially.

Signing off, Merrick.

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by On Your Own, the National Endowment for Financial Education or any of its affiliate programs.]