As our previous blog post stated, even if you are not 18 yet, it is never too early to start building your credit. Having a good credit score is critical in today’s society even as a student. Credit is the final determinant of whether you are approved for a loan, what interest rates you are approved for, and your ability to rent an apartment if you move off campus.
One of the easiest ways to start building your credit history is to get a credit card. If you are under 18 then you will need a parent to help you in order to get approved. A credit card, when used strategically, can help you set a solid foundation for your credit.
The higher your credit score, the better your credit. There are simple steps to ekep in mind that guarantee a higher credit score and a better credit card experience.
- Choose a card that works for you
Get a credit card that works for you. In order to entice you to sign up for their cards, many credit card companies offer incentives to attract your business. While it may be an attractive offer to sign up for a card that gives you special deals at your favorite stores, there are better alternatives you should consider that will help you immensely in the long run. When signing up for a credit card keep the following in mind: - Are you studying abroad? Many cards have benefits for travelers. A lot of cards offer "miles" that can help cover the costs of your flight. Others even offer no foreign transaction fees, flight insurance, and so on and so forth, cutttind down on some of the stress of traveling.
- Do you have educational loans? Some cards, like Upromise by Sallie Mae, allow you to earn "cash back" towards paying off your educational debt.
- Remember the due dates
Over 1/3 of your credit score is based on your payment history. That being said it is imperative that you pay on time. Many credit cards allow you to authroize text and/or email alerts to notify you when your account needs attention. Credit card companies also often offer automatic payment features so tha tyou never skip a payment! If you are more old fashioned, you can also use your calendar either on your phone or on the wall! - Pay off your Balances Every Month
As a young person who is just starting to establish credit, you may be subject to high interest rates (around 25%). With high interest rates looming in the distance, it is imperative that you do not carry a balance, or your debt will sneak up on you and you will be in credit card debt. In order to ensure you can afford your balance every month treat your credit card like your debit card. With your debit card you would not spend more than you could afford in your checking account or you suffer the consequences. If you spend too much on your credit card, even though you will not be charged an overdraft fee, you will still subject yourself to serious risks and may end up owing much more. - Do not apply for Multiple Accounts
Getting approved for more than one credit card in a short amount of time has an adverse affect on your credit. For now, if you get approved for a card, pace yourself before opening up another or closing the existing account. - Do not get a Credit Card and Let it Sit in a Drawer for All Eternity
Building credit means that you have to use your credit card. In order to build credit you need to have a payment history. That does not mean that you have to use your credit card for all of your purchase,s but it is important to take it out and use it (even on small purchases) every so often.
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