Before we go into how a college student can build credit, let’s focus on the uses of credit.
The primary reason you will want to build a credit history is to borrow money or show a person or a business that they should have faith and depend on you to keep your word.
How Do You Get a Credit Score?
Once you turn 18, you will be eligible to begin building a credit score. The first thing that you will want to do is have a source of income. If you don’t have a job or a regular source of income where you can make money in college, then you should work on that first. The worst thing you can do is open up lines of credit without the means to pay them.
With an income, you will be ready to get your first line of credit. If you bank with ING Direct then you can apply for the Electric Orange checking account that is overdraft protected with a line of credit.
However, if you never overdraft your account, which you won’t if you are managing your money like a banker, then you won’t have the opportunity to borrow and repay. Borrowing money and repaying that money is the way that you as a college student can build a credit score.
Credit Card Versus Store Cards
Most young adults automatically think of a credit card when they think of building credit but that is not the only way to build credit. Many stores offer lines of credit in house, such as Best Buy and the Gap. The difference between a Visa or Mastercard credit card and a store card is mainly the terms. Generally store cards charge higher interest rates and have higher fees associated. But you won’t have to worry about that. Also, store cards do not offer cash back. The best cash back credit cards will not be store credit cards but rather a card like Visa or Mastercard.
How to Beat the System
The best way to build credit without going into debt is to charge a small amount each month, maybe your cell phone bill or other monthly bill, to your card and pay it off immediately. That way you will begin to build a stable credit history without accumulating debt. However, if you’ve already hurt your credit, check out our post on the pros and cons of prepaid cards to learn more about this credit alternative. But if you’re looking to build credit, here is the best credit card for students to build credit.
Once you get started building credit, it’s important to be responsible with the credit that you have. In most cases, bad credit is worse than no credit at all.
How did you start building credit?