College is a great time in your life to start building a reputable credit score. Keep in mind that having an established credit rating plays a key role once you leave college and start your adult life. A good credit score is necessary to get approved for home loans, car loans, and credit cards. It also means that your credit status is healthy, and a healthy credit status makes you more attractive to employers and landlords, so you stand a better chance of getting a decent job and leasing an apartment that suits your taste.
Properly managing your finances in college is your “stepping stone” to achieving all these feats.
Managing Finances in College
Open a bank account – Because 15% of your credit score comprises the length of your credit history, it’s important to establish a credit history while as soon as you can—and college is the best time to start. As well as the fact that having a bank account helps build your financial history, you can use it to save your extra money rather than spend it for unnecessary things. This way, you’re starting to gain control over your finances and learn responsible money handling skills.
Pay your bills promptly – Common student bills include phone bills, utility bills, and rental fees. College is a good time for you to start making proper repayment a habit, so you should pay your bills in full every billing cycle to make sure that your repayment history is stays positive. Repayment history comprises the largest portion of your credit score (35%), so you have to keep it as clean as possible.
Becomes an authorized user of your parents’ credit cards – One way to establish a good credit score while still in college is to ask permission from your parents to become an authorized user of their credit cards. You can use their credit card with the lowest credit limit to make minimal purchases, and then you can pay off the balances in full every month. This way, you don’t have to apply for a credit card on your own and, at the same time, you learn how to use a credit card wisely.
Live within your means – College life often comes with lots of peer-pressure—buying new accessories or clothes, dining out with friends, and going to parties—just to stay connected with colleagues. However, you should take into consideration that making these activities a habit can spoil your finances, especially if you don’t have a stable income to keep up with your needs. Never live above your means and don’t make unnecessary purchases that can ruin your budget.
Apply for a credit card – Once you have opened a bank account and become an authorized user of your parents’ credit cards, it’s easy for you to apply for a credit card. Just make sure to shop around for credit card offers and compare annual fees and interest rates before you apply for one. Remember that if you’re going to apply for several credit cards at once, the credit card companies will request a copy of your credit reports to check your credit worthiness and each inquiry can slightly lower your score.
Monitor your credit – Regularly checking your credit reports with the help of a credit monitoring service is a good way to make sure that your finances are always in order and that there are no errors on your report that can damage your score. Credit bureaus get the credit information that they put on your reports from your creditors, so if a creditor reports a mistake, it will go on your report and may harm your reputation. If you spot such an error while reviewing you reports, it is important to report it.