*Disclaimer: I am not a licensed financial advisor, therefore, I cannot guarantee the results presented.*
In March of this year, I finally got approved for a credit card after months of searching. I researched secured credit cards, student credit cards, I asked for advice from my mentor, and I even made a trip to a branch of my bank. One night as I was wide-awake trying to fall asleep, I let my mind wander around and I googled “credit cards for college students” and selected the Journey Student Credit Card from Capital One. I entered my information and to my surprise, I was approved in less than 3 minutes. (That definitely beat the paperwork I was planning to fill out from my bank). I eagerly waited for about two weeks to finally receive my new card.
One of the best points of advice that my mentor gave me was to download the Credit Sesame app. Unlike the other app that I was using, it gave me a breakdown of my credit as a whole by assigning grades to each category. Each one also is a percentage of your score. The categories include: payment (35%), credit usage (30%), credit age (15%), account mix (10%), and credit inquiries (10%). I’m going to give a brief history if needed and explain what I did with each option over the course of these last few months.
Payment (35% Impact)
From the videos and advice that I was seeing and reading online, I saw that in order to keep a good score, you at least had to pay the minimum balance on the card by the due date. For me, that was $25. Now considering that I am already thousands of dollars in debt due to my student loans, I made sure to pay the card off in full every month by the due date. I also only paid for two things that I actually used and needed–my public transportation expenses and my phone bill. It is also important to note that I had an off-campus job that contributed to my income every month. My Capital One app kept me motivated too. I made 6 consecutive on-time payments and my credit limit increased from $500 to $750.
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Credit Usage (30% Impact)
I did not pay attention to this part of my score breakdown until recently. I thought that as long as I paid back the full amount each month, the usage shouldn’t have mattered. But this was ultimately keeping my score from increasing. Typically, you should not use more than 30% of your credit limit (as indicated by Credit Sesame). In my case, that means I should have been using no more than $150 of my then $500 limit. My phone bill alone used up most of that. I was on average using 34% of my limit. However, since my credit limit has increased, I can worry about it a little less now.
Credit Age (15% Impact)
There really isn’t much you can do with this other than keeping your accounts open for more than 3 years. My oldest open account from my good old friends at the Department of Navient is 2 years and 11 months old (almost there). So if you’re a college student with loans, you most likely have had some impact on your score already (which is very bittersweet to think about really; it’s great that you have some open accounts to help your score, but also, student loans. Ew). I was also recently approved for a store card with Amazon. It is the youngest account I have open at 0 years and 0 months.
Account Mix (10% Impact)
Credit Sesame advises you to have multiple accounts for use so that you can spread your payments and avoid having high credit usage. This is mainly why I applied for the Amazon Store Card. My mentor also advised me to get more than one card, but she suggested going to a retail store such as Macy’s. I didn’t think that was a bad idea, but I don’t really shop there often enough to get a card. That’s why I thought the Amazon store card was perfect for me because I am a frequent Amazon shopper. The card also has really great benefits, including a $50 Amazon gift card upon approval.
(Image via Flickr)
Credit Inquiries (10% Impact)
When I bought my phone in October of 2016, I had a background check ran on my credit. I remember my mom being more upset about it than me. Little did I know that credit checks decrease your credit score! After talking to her about it, that is where my curiosity with my credit began. Don’t let this scare you, however. In order to get approved for some accounts, you’re going to have to accept the fact that they will run your credit background. Credit Sesame advises you to keep your inquiries down to 2 per year in order to avoid lowering your score. The inquiries usually go away after a few months.
Paying attention to mostly all these features, I watched my score increase every month from 567 to a nearly perfect 708.
Now, what if you don’t have a job but still want to try to start building your credit? After all, credit controls a lot of aspects of your life; approval odds for a car loan, house loan, jobs (mainly if you plan on working in the financial sector), renting an apartment, and a lot of other arguable necessities that are ruled by a capitalistic economy. If you’d like to start small, research more on secure credit cards. With a secure credit card, you pay the balance beforehand. For example, when you apply for a secure card with a $500 limit, you pay the $500 up front so that the institution already has the money on hand, just in case you miss a payment. Eventually, you get the money back once the card is paid off. The whole point of a secured credit card is to build your credit and report it to the credit unions. This is typically used for people who have extremely low credit scores who are working to build their credit back up but can’t get approved for a regular card. There are also a lot of great student cards out there with extremely low interest rates. Do the research and find the card that is right for you.
I definitely encourage anyone who is interested in building their credit to go ahead and start researching; the sooner, the better. If you have any questions for me in particular, connect with me on my social media handles below!
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