When you are still a student, the thought of building good credit might seem like a faraway goal. However, the sooner you can start, the more time you have to establish a credit history and to learn how to use credit cards responsibly. Building good credit can help you to qualify for certain future goals, such as a new house or car.
1. Choose a credit card for students.
One way to get started is to select a credit card for students. These cards may have low limits on them to help keep you on financial track. Also, if you apply to many cards in a short period of time, you may hurt your credit score. Selecting one tailored for students helps to increase your chances that you are approved.
2. Start now.
While you do not want to pile up insurmountable levels of debt before you even have a full-time job, your credit history matters. Your history is one of the factors calculated into your credit score. For example, even after 10 years of having a credit card, you may still not have a perfect grade in that column, so the sooner you start, the better.
3. Select low limits.
Even if you do not apply for a credit card made for students, you should choose one that has a low limit on it. When you get your first credit card, you might feel tempted to spend right away, but doing so can leave you with tremendous amounts of debt in the future. Select a card that forces you to stay within a certain range of debt.
4. Pick store cards.
Store cards can be a place to start because you may find that they are easier to qualify for than other cards. Also, you can also start to earn rewards with some of these cards, allowing you to save more money than if you shopped at the store without the card.
5. Research rewards.
Credit cards with rewards, even if they are not for a particular store, are useful. For example, some credit cards might give you money back for all of your purchases, so you can use that money to pay off some of the debt or to put into your savings account.
6. Obtain a student loan.
In the event that you need to take out loans for college, see if you can do so in your name. You may find that it is difficult or impossible to qualify if you have no credit history, however. In the event that you do qualify, you may find that paying back this loan can raise your credit score. Keep in mind that you generally do not start to pay back loans until after college; you may have the opportunity to do so, but some lenders penalize for early payments.
7. Procure other loans.
Taking out an excessive amount of loans is a poor choice, especially when you are still on your way to obtaining a full-time job. However, you may obtain a small loan to pursue a business venture, or you might have a loan on your car. When you are making payments, you are working to increase your credit score.
8. Pay your bills each month.
You might feel tempted to make one large purchase and then to pay it off over the course of the next year or so. Keep in mind, however, that you are not just paying for the sum of the purchase; you are also paying for the interest rates.
9. Research interest rates.
Many people find themselves in major problems with credit cards not so much because of what they spend but because of the interest rates on those purchases. Looking for interest rates that are as low as possible can help you to keep your credit under control.
Creating a budget for your spending habits on your new credit card is important. Each month, make sure you are aware of exactly how much you can put on the card before you start to open the door to problems with debt.
These habits can help you to build a good credit score, and they can also assist you in creating a savvy financial future.