3 Easy Ways to Build Credit as a STEM Student
A good credit score is very important
A good credit score is very important when you apply for a car loan, credit cards and in some cases some rental properties will use your credit score as a determining factor in their decision to rent you a place.
Keep reading to learn how to build credit as a student in three easy steps
Become an authorized user on a family member's credit card
The easiest way for many students to get started with credit is to become an authorized user. To become an authorized user, someone you know and trust such as a grandmother or parent with a credit card can add you to their account. As long as payments are made on time and the balance on the card is low, being an authorized user could help you build a positive credit history and start on the path to a good credit score.
Always make on-time payments, and keep your balance-to-credit-limit ratio low is the only way to make sure your activity improves, rather than hurts, the credit score of your authorized user.
When I was 17, my grandmother added me as an authorized user on one of her credit cards and it this was a great way to start building my credit form a young age.
If you want to establish credit with a credit card, don’t have more than one. Choose one card with good rates and terms and pay off the entire balance monthly. Consider using it just to pay for one type of required expense each month so you won’t be tempted to use it to overextend
Creating a budget while in college is a great way to track spending and understand where your money goes. Here’s how you can start budgeting now and work toward your bigger financial goals.
Get your Own Student Credit Card
Once you’re able to open a credit card in your name, this will be another way to build your credit history. A student credit card can be easier to get because the credit score requirements are usually not as stringent as with a prime credit card. Some student credit cards offer rewards like cash back or rewards points which can help you save money on many college expenses.
Be aware that interest rates on student cards can be much higher than the average credit card interest rates so avoid carrying a large balance, which will keep your interest charges low.
In college I always paid off the card balance in full as I wanted to avoid paying high interest rates and didn’t want to use the card as a way to spend money that I didn’t have.
Once you open your first line of credit — whether it’s a credit card or a student loan — you’ll want to manage that credit wisely. Avoid opening multiple accounts at once as students with short credit histories open lots of new accounts in a short period of time might be seen as riskier borrowers than those with long histories and fewer accounts.
Get Credit on your Rent Payments
Paying your rent on time isn’t always reflected on your credit. There are several services that will help ensure your positive rent payment history is reported. Using rent payments is a smart way to bolster your credit score without incurring debt, using money you’d be spending anyways. If you’ve always paid your rent on time and your lease is in your name, it may be worth trying to get it reported on your credit.
Easy Ways to Avoid Ruining Your Student Credit
A good credit score is very important
When it comes to credit, it takes a while to build up your score and just a few mistakes can ruin it. With that in mind, here are some ways to avoid ruining your credit before you’ve even chosen a major.
Don’t Make any Late Payments
Making your monthly payments on time will be one of the most important factors in not ruining your credit score. This means that you should always make at least the minimum amount that is due each month.
If you think paying your credit card bill late every once in a while, isn’t a big deal, you’re definitely wrong. Your payment history is the most important factor that makes up your FICO score. This means a single late payment could cause serious damage to your score, but it also means multiple late payments could harm it even more. Lenders want to see a consistent history of paying back on time and will be more likely to lend to you at better rates if you can demonstrate this.
The mistake I made in college was not to pay all my bills on-time. The truth is that once your debt starts growing with interest, it can be very hard to pay if off, especially in your early 20s, when your salary is at its lowest point.
Creating a budget while in college is a great way to track spending and understand where your money goes. Here’s how you can start budgeting now and work toward your bigger financial goals.
Treat your Credit Cards as a Debit Card
Credit cards can seem tempting and like free money. But to avoid the temptation of overspending, treat your credit card like a debit card, and avoid using it unless you truly need it and you can pay it off right away.
For example, If you charge $3,000 to a credit card with a 17% APR, and only pay the minimum each month — it’ll take you 10 years to pay off your initial balance, by which time you’ll have paid more than $2,200 in interest.
That’s why it’s a good idea to keep low credit card balances and no overextend your credit utilization. For more information about how to build your credit, read the following article.
Apply for Scholarships
Apply for as many scholarships as you can. Unlike credit card debt, student loan debt can almost never be discharged in bankruptcy, so it is extremely important to put a plan together to paid student loans off as soon as possible.
BOTTOM LINE
Getting an early start on building credit can help you achieve your financial goals before and after graduation, as well as help you obtain lower interest rates in the future. Just make sure to practice smart credit habits, like keeping your debt at a minimum, avoiding opening or closing too many cards. If you follow this advice, your credit score should never hold you back from your financial goals.
If you need to repair your credit, there are companies such as CreditNerds which offers a unique, free credit repair service and works with creditors as well as credit bureaus to find and remove negative items on clients’ credit reports. Additionally, CreditNerds provides educational resources along with the credit audit to assist clients with expanding their credit knowledge.
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