If you are a student, you are in a unique position to begin building credit at a young age. Now is the time to start establishing credit by implementing smart money habits and thinking long-term. Credit is often, if not always, checked when you purchase a car, sign a lease, or apply for a loan. Prepare yourself now so that you are approved the next time you apply for a loan or lease.
Apply For Your First Credit Card
If you do not have a credit card, it is a good idea to fill out a couple applications with companies that offer cards with a specific spending limit and low-interest rates. Even if your spending limit is only $200 or $300, it is still good to have the card to help establish your credit over time. If you are going to try to obtain one of these cards, make sure you are only filling out a couple of applications because applying for too many cards at once could work against your credit score.
While some people may think getting a credit card is a bad idea because it can lead to debt, you need to have at least one to show a regular pattern of on-time payments and financial responsibility. It is a great way to start adding positive records to your credit report. You simply need to spend responsibly and avoid maxing out your cards. Use your card to make a small purchase and then pay off the balance before it is due to avoid dealing with fees.
Try Getting a Car Loan
Did you know there are ways to build student credit with a car loan? If you need to purchase a car because you need something reliable to use for transportation when traveling back and forth from your home to the school, applying for a car loan could work to your advantage. Not only are loans available for those without established credit, but these specific loans could help you build your credit over time as you make regular, on-time payments on the loan each month.
Avoid Co-Signing For a Friend
If a friend or family member asks you to co-sign for them to get a loan, politely decline. While it is fine to have a parent as a co-signer for yourself, it is different for you to act as a co-signer on a loan when there is a risk that the person receiving the loan will not pay it back. It is not worth the stress or the drama involved, so make sure to avoid this kind of situation.
Building your credit when you are a student is a good way to get a higher score and get approved for the things you want in the future. There are different ways to start improving your score over time, but most importantly you want to be financially responsible. Pay off your balances early, or at least on time, never borrow more than you can pay back, and avoid frivolous purchases. If you follow these steps you should be on your way to a strong credit score in no time.