Most students haven’t thought twice (or even once) about their credit score, mainly because they’ve had no real reason to. But once you start applying for student loans or decide to rent an apartment, your credit rating is suddenly going to become important. Whether you have stellar credit, a spotty history, or no rating at all, it can have an impact on what you’re able to accomplish in terms of getting a line of credit or a lease. So here are just a few ways to improve or build your credit score.
Pay your bills. Even if you have no credit history to speak of, there are other ways for lenders to determine whether or not you’re worthy of receiving a line of credit. For example, they may look at bank accounts to see if you maintain a balance or suffer from frequent overdrafts (showing your money management skills). Or they might look at your history of bill payment. As a new student you may not have any history, but eventually you’ll pay for rent, utilities, and other monthly bills, and creditors can look at these in lieu of a credit score. You can also self-report payments with a company like PRBC (Payment Reporting Builds Credit) as a way to improve your appeal to lenders.
Get a secured card. If you’re trying to build credit and you’re having trouble getting a credit card with favorable terms, perhaps you should opt for a secured card instead. You can get one through your bank, in most cases, and all you have to do is provide collateral (say, $500) for them to hold so that you can get a credit line for the value. You can then use it like a standard credit card, paying it off each month, for a year, at which point you will get your collateral back with interest. After that you can keep using the card sans collateral or sign up with creditors that are now willing to offer you much better terms.
Use credit cards wisely. Building credit is an uphill battle that requires planning and diligence. It’s tempting, no doubt, to think of your credit as cash in your pocket. But it’s not; it’s a loan. When you forget that you can quickly get into trouble. So set limits for yourself that include the amount of money you can put on your card each month (no more than you can afford to pay back monthly), as well as what you can use the card for (gas, groceries, textbooks, etc.).
Start paying back loans. Although most student loans don’t call for scheduled payments to begin until after graduation, you can get a jump on your debt repayment by making regular (albeit small) payments while you’re still in school. This is not only a good way to reduce what you owe before you start accruing interest, but it also helps to establish that you are low-risk when it comes to lending. You can use this to improve your credit score and potentially get future loans faster than your classmates. Of course, you might think that taking out fewer loans is a better plan, and it can be if you have trouble keeping up with payments. But if you’re looking to build credit, repaying loans is one good way to get the job done.
Get a copy of your credit report. Even if you haven’t made any efforts to build credit you could find yourself in trouble if you’ve unknowingly been the victim of identity theft. By ordering a free report from an organization like AnnualCreditReport.com, you can become aware of any black marks so that you can start to clean up your credit. Whether you attend USF online or Harvard, you’re smart enough to know that becoming aware of a problem is the first step towards solving it.