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Month: April 2016

How to build your credit while you are in college

Most people work really hard to get into a good college, so with that in mind it’s important to remember that you’ve got to work just as hard on your finances if you want to achieve financial freedom. The best way you can do that is building a credit score, with a credit card. But don’t fret! It’s nowhere near as hard or scary as you might think. Each of us, including your parents, has a credit history, some a lot worse than others. To avoid getting yourself a bad history, take a few minutes now to read what will help and hinder your score.

Credit Cards Aren’t For Everything
The first mistake most college students make when they get their brand new card is throwing a party and charging all the supplies to the card. I don’t even need to tell you how much of a bad idea that is. Just because you have a shiny piece of plastic that lets you spend a ridiculous amount of cash, you don’t actually have, doesn’t mean you should. Ever. Never. Ever. One can never improve their credit line by doing this. You want to save the card for regular purchases, like when you shop for food at a grocery store. Use it then. Read more here.

Don’t Impulse Add
Say you get to the checkout at the grocery store and lay your eyes on a nice chocolate bar and can of soda. Ask yourself, “Would I have bought this before I had a never ending supply of money?” When your answer is no, make that decision to not buy the items. Teaching yourself this impulse control, with regular purchases, while in college can be hugely advantageous to not being insanely in debt and thus having a bad credit score by the time you’ve reached your mid thirties.

Use Money You Have
Most banks allow you to open up “online savings” accounts. Open one. After you’ve made a purchase on your card, transfer that amount to this online savings account. This way when it comes time to pay the bill, you have money you already reserved just sitting there waiting to pay the bill. Paying your bill in full helps your score, while paying just the minimum does not.

Don’t Use Funds You Haven’t Got
I can’t stress this step enough. Put money aside to pay off the bill. Do it. Remember we’re trying to build your credit score so banks are happy to loan you money, for a house, a car, a business, etc. If you make the mistake of thinking this month you’ll just make the minimum payment and “pay the rest” next month, you’ll quickly fall into a bottomless pit you can’t climb out of. Not paying your bill off each month makes a problem for the tomorrow you. Take charge and control of the today you and make the responsible decision.

The Real World
As most college students get some assistance from their parents, from making car repayments to buying appliances, try and take charge of these things yourself. As silly as it may sound, if you’re paying off a car loan under your parents’ name, or they are happy to keep helping with college bills and living expenses, ask them to transfer the money to you instead. Tell them you want to establish a good credit history early on and become responsible by making the payments under your name. Banks love people with long histories of making consistent, on-time payments. So lots of little bills or bits and pieces here and there will see your score rise quickly.

Tip: Get a balance transfer card

 

 

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