Creating of a good creditworthiness is essential for a prosperous future. When you want to buy a house or make other large purchases – good credit will be needed. For those who want to borrow money and have high credit rating, creditors approve loans ready to give more advantageous credit terms.
While you study in a college, you are only at the beginning of this path, or you do not have a credit history at all. In the latter case, you are one of almost 15% of Americans who do not own a good credit, majority of them are youth.
If you are still young, then it may seem like you have a lot of time, but building a good credit is not a matter of one day, since one of the parameters affecting is the successful history of creditworthiness duration.
To understand how to build good credit for college students, read this credit creating and developing guide.
Why do you need a credit rating?
Borrower’s rating is an assessment of the credit behavior of each borrower, which helps creditors to determine the degree of risk, when considering an application from borrowers. It is expressed in numbers in the form of credit points.
Credit points are added or subtracted depending on the length of the credit history, the timely paying, the full sum of obligations, the number of loans, the balance of all borrower’s credit cards and different variables.
The range of credit scores vary from 300 to 850 points. The greater the number, the better credit, the less risky borrower you will be counted, the better conditions lenders will be able to offer.
How a college student can build a credit
College study period is cool for laying the foundations of your successful financial future with great opportunities. To do this, you do not have to specifically break away from the educational process or fun student life after class.
We suggest that you familiarize yourself with several ways to build a good credit for college students rating that are available to college students.
Choose the right loans
Most college students need financial support during their studies, so two thirds of those who graduated from college in the US took a student loans.
It is worth paying attention to federal interest-free loans for students. Taking such a loan, you do not have to pay interest, which will greatly facilitate your loan repayment and reduce the likelihood of delaying payments. Timely and fully fulfilling your credit obligations during several years of study will have a great positive effect on your credit rating. This can be a great start for you.
Authorized user of credit card
You have the opportunity to become an authorized user of your parents’ credit card as well as other family members who are reliable for the finances and want to support you. You will get an addition to your credit points as an Authorized User, like the major owner of the credit card you are signed up to, providing you both to repay the debt in a timely manner.
Get a credit card
Credit cards are a great tool for building your credit. They have many additional benefits, rewards and various bonuses. But many people do not know how to hold back during shopping and they strive to spend significantly, than they can afford.
This behavior leads to cost overruns, an increase in balance and the inability to repay the debt on time. In addition to increasing debt, this entails a decrease in credit score. It is therefore worth getting a credit card when you are sure that you can control the flow of money.
Pay bills on time
The way you pay most of your regular monthly bills is taken into account by credit bureaus when assigning points to you. Therefore, a responsible attitude towards all of your obligations, not just credit, will affect your credit rating.
Cultivate the right credit behavior
When you get into the habit of paying your bills on time, avoiding late payments on loans, maintaining a small balance on credit cards, you will lay a solid foundation for a great loan. It is also worth considering that opening a large number of credit cards negatively affects your credit score, so you should not run several new cards at once. Also you should not close old credit cards, because this will make your credit history shorter.
Do not act as loan co-signer for your friends
For people with insufficient credit score or an absent credit history, a co-signer may be needed to obtain a loan. You may want to help your friends, but by acting as a co-signer, you risk your credit, which is still not too strong. If your friend for whom you vouched does not pay his loan on time, this will immediately affect your credit score.
Check out the result of your credit behavior
You can request a free credit report from one of the US credit bureaus, according to federal law. Also, some services and credit cards can inform you about changes in your credit score for free, which is very convenient for tracking the status of your credit. This will help not to miss anything important that may occur with your credit.
Now you know what options you have as a college student to build a good credit. College time is probably the best time to do this, so do not miss this great opportunity.
You can search and select the most appropriate loan options to start your credit history. You can start with a credit card for a small financial support, or with a student loan.