5 Smart Ways for Students to Build Credit

Having bad credit or no credit at all can keep you from purchasing a house, paying for your education, or even obtaining your dream job. Due to this, building up your good credit is essential. However, this can be a little tricky as a student. In order to have good credit, you must use your credit responsibly. Here are five ways to build credit as a university student.

Only Borrow As Much as You Can Afford to Pay Back

When you start only borrowing money that you can afford to pay back, it allows future creditors and lenders to see that you are a responsible borrower. This will make it easier for you to borrow money as well as get new lines of credit. By showing that you understand the importance of borrowing what you can afford to repay, you can not only build up your good credit, but also avoid falling into a debt trap. The same thing applies to loans. By only taking out loans that you can afford to pay back, even if the lender says you qualify for more, you will ensure a positive credit history.

Utilize Only Minimal Amounts of the Credit Available to You

Using all of your available credit, or even coming close to that is extremely irresponsible, especially as a student who has limited access to funds. This is especially the case if you do not think you can repay the entire balance by the end of the month. Those people that tend to max out their credit cards are usually the ones who have trouble repaying the loans that they borrow, and so lenders can be more wary when it comes to giving out loans. It is recommended that you stay below fifty percent of your credit limit, and even attempt to stay below 30% in order to build a good credit score.

Use Only One Credit Card

Many people who first start using credit cards begin to accumulate a huge collection of them within the first few years of their credit use. You should not make this mistake, as opening up too many credit cards all at once is not a good way to build up good credit. Keep in mind that the more credit you possess, the more credit you’ll end up using which will make it harder to maintain your credit card payments. On top of this, having too many inquiries on your record will negatively impact your credit score.

Pay Off Your Credit Card in Full

If you only use your credit card enough that you will be able to repay it in full at the end of the month then you wont have to worry about accumulating debt. On top of this, being able to repay your balance every month shows creditors that you can pay your bills on time, which is something that is very beneficial to your credit score. Keep in mind that a substantial part of your credit score is you being able to make payments on time, and so paying your balance in full will improve your credit score.

Age Your Accounts

The longer that you have a line of credit, the more beneficial it is for your credit score. By leaving your accounts open and letting them age, it will allow you to increase your credit age and thus build good credit. Avoid closing old credit accounts because of this, and keep in mind that if you do decide to close an account, it will not disappear from your credit report right away. In fact, it will take a few years in order for credit bureaus to drop your closed accounts.

Finances - 19 Jun, 2014 - No Comments