By: Skylar Shaw
Having good credit is the key to obtaining financial freedom. Credit determines if you can receive a loan for things like a car, phone payment plan, house, apartment, etc. I am sure you heard of credit horror stories where new credit users went on a shopping spree, and at the end of the month, they did not have money to pay their bill. Consequently, their credit score drops, and credit bureaus become less likely to loan you money. Worst case scenario, after graduating from college, it may be hard to get an apartment or even a job.
Follow these five tips to help you establish, build, and maintain a line of credit!
- How to Select the Right Credit Card
You will usually get a credit offer (through prequalification). If you have not received your offer in the mail, take the initiative to apply for a credit card. Before applying for credit, make sure you thoroughly research where you are opening a credit line. I recommend the Discover It card, because it is the perfect starter card for college students. The Discover It student card has no annual fees. There is no fee for your first late payment, and you can earn 2% cashback on gas stations and restaurants plus 1% cashback on other purchases. With the Discover It card, you can even receive 25 dollars every year while in college for having a 3.0 GPA. You can learn more here.
- Do Not Go Overboard (Opening Multiple Credit Lines)
Do not bite off more than you can chew. Just because you may qualify for opening another line of credit does not mean you should. It is difficult to manage multiple credit lines while in college. Bills are always due at the end of the month.
- Watch Your Usage
Experts recommend using 30% of your credit line. If you are approved for a 500 dollar credit limit, you should be using around 150 dollars. Purchase small items from stores, purchase books, treat yourself to Starbucks, but do not buy high priced items. Ask yourself, if you did not have a credit card, could you afford to purchase this item. If the answer is no, do not use your credit card. If you answer yes, then use your card and save money to pay your bill when it is due. Overall, do not be afraid to use your card, but use it wisely and remember to use no more than 30% of your credit limit.
Payment is very important. Paying on time and knowing how much to pay greatly influences your credit score. I recommend paying your due balance 2-3 days before the due date, because it takes time to process the payment. Aim to pay the full balance, but if you can not do so, at least pay more than the minimum balance due.
- Lookout for Fraudulent Activity
Like your debit card, frequently check your credit card statements. You should be able to recognize all of your purchases. If anything looks unfamiliar, contact your credit provider immediately. Also, check your credit report with Credit Sesame or Credit Karma to make sure no one is opening a line of credit in your name.
Now that you have my top tips on maintaining credit while in college, have fun spending–responsibly, of course!