College Girls How to: Building Credit

Hopefully at this point in your life you’ve at least heard of a credit score, you know, one of those adulting terms you try to avoid as long as financially possible. If you’re lucky, or unlucky depending on how you view it, your parents have introduced you to the idea of developing credit so that once you leave the golden gates of college, you’re considered credit-worthy.

WHAT is a credit score?

A credit score is made up of three numbers that can ultimately make or break your financial well-being. This set of numbers allows banks, credit unions, mortgage brokers, etc. to determine how likely you are to repay your debt. This comes into play when buying a house, a car, personal and student loans, and credit cards to your favorite stores.

WHEN and HOW to start building it?

The biggest tip when it comes to when to start building credit- start early. If you’re a college student, it’s in your best interest to get your first credit card prior to graduation day. As a student, many large credit card companies such as CapitalOne and Discover offer student credit cards with low APR that will allow you to start building your credit. Another option would be to start with smaller retail store cards such as Victoria’s Secret or Forever21. You can use your credit cards in case of emergency but be careful with your spending. The amount of credit used collects interest on a monthly basis, so be aware of what you’re spending and when your monthly bill is due. Many companies start with a $25 minimum payment; however, the more credit used the larger your minimum payment will become. Whatever you do, do not cancel a credit card! It’s not something you need to use all the time, but it’s always a good idea to buy things and pay them off right away to help boost that score!

Factors that will affect my credit score?

  • Payment history- Keep track of your monthly payments as if it were an assignment. Jot it down in your planner and be sure not to miss it! Payment history can make or break your credit score
  • How long you’ve had credit- for you to be truly credit worthy for larger things such as an auto or student loan, two years is the average amount of time your credit line should be open.
  • The types of credit you have (credit cards, auto loans, student loans, mortgages, etc.)
  • Your credit limits and how much of those limits you’re using- Your card may allow you to spend up to the $500 limit, but it’s never a good idea to max it out!
  • How much debt you have- whether it’s federal loans or private student loans, you’re a college kid so unless your fortunate enough to have your education paid for this is one factor you can’t always escape, remember college is a huge investment in your future!
  • Hard inquiries on your credit report- don’t apply for every credit card out there because if you’re rejected, it will leave a hard inquiry on your credit report that can take up to two years to be removed!