From buying a first home and qualifying for a mortgage to financing a reliable set of wheels with a car loan, many early rites of passage require a good credit score. Unfortunately, many college students do not have the strong credit history needed to make those rites of passage a reality, and some do not even know where to start.
Credit scoring is highly complex, and the various credit rating agencies use a variety of proprietary methods to determine the creditworthiness of borrowers. And while some of those criteria remain closely guarded secrets, we do know that factors like the amount of debt, payment history and the age of accounts play a big role.
Since young people by definition will have younger accounts than their peers, it pays to focus on the other factors, including a history of on-time payments and a low amount of debt. Here are some simple but effective ways for college students to boost their credit scores and start a positive credit history.
Be Smart with Student Loans
In most cases, college students are not required to make payments on their student loans until they have left school, but it could make sense to pay down those loans even before graduation.
If the loan arrangement allows it, making interest-only payments could be a great way to start building credit. College students who are employed part-time and have sufficient cash flow may want to consider making these advance payments – it will mean less to pay back later, and a higher credit score.
Get a Credit Card – and Use It Responsibly
A credit card is another good way to build credit, but only if you use it responsibly. If you spend too much and go into debt, your credit-building efforts will backfire badly.
Think of your first credit card as a set of adult training wheels. Instead of charging everything from pizzas to textbooks, make a few small purchases and pay them off as soon as the bill comes.
As you get better at budgeting, your money, you can begin to put more on the plastic. Just be sure to track your spending carefully. After all, your goal is to build up your credit score, not build up a pile of debt.
Make Sure Your Rent Payments Are Reported
If you are renting an off-campus apartment, make sure your rent payments are being reported to the credit reporting agencies. Not all property managers report these payments, so do your homework and make sure your landlord is doing the right thing.
It is important that the lease be in your name, so double-check your paperwork and make changes if necessary. Paying rent is a great way to build credit, but you need to make sure you are getting credit for those on-time payments.
Credit is an important thing in the lives of young people, and the sooner you start building your credit score, the better off you will be. Whether you are still in school or starting your first post-school job, there are things you can do to boost your credit and start building a better future.
Credit Score Help Books
If you still need some more help, here are some suggested books from us at CheapestTextbooks.com:
Keeping Score: What You Need To Know To Make Your Credit Score Grow
Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future