Should I start building credit while at college? The dos and don'ts of early credit building

Starting to build credit in college can be a great way to get a jumpstart on your financial future, as long as you’re responsible and mindful of the consequences.

Credit building can seem like a daunting task while still in school, however taking advantage of this time period and learning your way around credit management now will set you up for success later down the road. 

In this post, we'll explore why it's important for young adults starting college to consider building their credit sooner rather than later, offering guidelines on how to effectively build credit responsibly while at school. 

What is credit and why is it important?

Credit refers to the ability of an individual or organization to buy goods or services with the promise of paying for them later. It's a crucial tool that enables people to make significant purchases such as homes, cars, and education – expenses that most of us don’t have the funds to cover in our current accounts. 

Good credit history is essential when applying for loans, credit cards, or mortgages, as it demonstrates to lenders that you are responsible in repaying debts. As a student, it might feel a bit soon to be thinking about this. However, the earlier you start responsibly building your credit score, the easier it will be for you to buy those larger items more quickly after you graduate.

Learn how to responsibly manage your credit

Maintaining good credit is vital for a secure financial future, as it opens up doors for opportunities that would otherwise be unavailable with poor credit history. In order to have good credit, you need to make sure that you’re borrowing responsibly, and within your means – putting everything on a credit card because you’ve spent all your student loan in the first week isn’t the right way to go.

Instead, use a credit card to pay off things you can afford. For example, you might choose to put your transport costs on there, as that’s a regular payment. You can then set up your current account to pay your credit card off straight away. Whilst it might seem like you should just use your debit card in this case, using your credit card builds up a good credit history, with little or no risk to you, so long as you have the funds in place to pay it off.

Don’t spend beyond your means

When thinking about starting out on your credit journey, it’s important to be fully informed about the commitment you’re making. You need to be a responsible person to manage borrowing above your means. So, don’t be tempted to put everything on credit just because you can, or to stretch your spending out until your student loan comes in.

Instead, focus on budgeting wisely so that your expenses are within your financial limits. Although you might have some income from a part-time job, that doesn’t mean you should go out and overspend. Keeping your outgoings under control sets you up for healthy financial habits moving forward.

In conclusion

As a student, a credit card should only really be used as a way of building a good credit score, or for emergencies. That way, you can ensure you’re in a strong financial position when you finish college, rather than having a poor credit score that follows you for years to come.

Skyler Watkins
Skyler Watkins is an aspiring author and editor located in Columbus, Ohio.
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