When one enters college, there are very few, but very specific, thoughts on one’s mind. Graduating, finding a job, and beer money were at the top of my list. Near the very bottom was my personal credit. Living in the dorms, existing one ramen cup and Coors Light at a time doesn’t leave much time to think about what my FICO score is. So, let this post guide those students that may be reading this blog as an impetus to begin seriously thinking about opening that first student credit card.
What Is A Credit Score?
When I was 18 years old (the age you can start building credit), I had no idea what a credit score (also called a FICO score) was. But, in doing research before getting my first credit card, I found out just what a FICO score was. It’s a measure of your creditworthiness, and it’s an easy to read way for creditors to see if lending you money (or a credit line) is a safe bet. Thus, it is calculated in this way, on a scale of 300 to 850- 35% payment history, 30% owed bills, 15% length of credit history, 10% new credit, and 10% types of credit.
So, if you have student loans, you’ve already begun building your credit, and have a credit score. If you already have a credit card, that counts as well. The best advice I can give you is to treat any credit card like a debit card. Pay it off every month in full (or every week, if you really want to be on top of yourself). That way, you have an accurate account of your spending and not max out what you can pay back.
How Should I Get Started?
I would start by reaching out to a number of the student credit card products out there. Personally, I like the Discover it card, not only because they really cater to students (no late fees, anyone?), but also personal experience working with the Discover Company. When I needed to raise my limit after a year of cardmembership, they raised it. Then, keep your bills as low as possible, preferably $0. A common misconception I have heard is that the companies will lower your credit card score if you “let” the credit card companies earn some interest off of you. This is not true. Your credit card is unaffected by having a zero balance at the end of each billing cycle.
Apply: Discover it® for Students
What’s the Importance of Credit?
When I wanted to move off campus (and who doesn’t when you’re sharing a room with two other dudes), I had a lot of trouble getting an apartment to accept my lease without a credit history. In fact, I needed my very generous parents to sign on as co-signers. If I had my own credit score, it would have been a non-issue.
Also, try buying a car without credit. Having credit will not only allow you to buy a vehicle, having a good credit score may lower the final cost of the car once you pay back your car loan.
These are just some simple “starter” rules for those of you that may be curious about how credit is calculated and the importance of credit in general. As always, please sound off in the comments if you have any questions that need clarification!