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Guest Blog: Jimmy Jones
Since learning and gaining knowledge about the curriculum they take up in college is the prime objective of students, it is natural that they would have the least interest to know about credit scores. Perhaps, it is the last thing they want to know but considering that credit scores are essential for getting jobs (in some cases), it is better to familiarize with it early in life. In fact, the college days are the best time to build credit score right from scratch. And you can do it without being unmindful about studies. Since students do not have to shoulder any financial responsibilities for their family, it is easier for them to build good credit score ranging from high 600 to mid 700. However, one thing might appear baffling to students – how could they start building a credit score.
If you have attained 21 years of age, it is not at all a problem to start the process of building credit score because you can avail some line of credit. This is the age when you could earn your first credit card but might require a co-signer or furnish some proof of income. How you can set out to build your credit score depends on the willingness of your parents or guardian to become a co-signer or include you as an authorized user of their credit cards. Having found the right footing, you can now begin your journey in scripting your credit score that becomes very important to lead a decent life. In this article, you would know how students can establish a good credit history.
Avail student loan
To build your credit score, you must take a loan that becomes the starting point of your credit history. This might often be difficult for students because to take a loan you need some credit history no matter how brief it might be. The same applies to credit cards that require some proof of income or credit history. Even if you want to avail private student loans, you will face the same difficulties in furnishing your credit score. An easier way of getting a loan could be by availing federal student loan that does not require any credit check. Once you avail the loan, you can start paying it back on time, every time so that you create an impressive credit history that translates into a good credit score.
Get a student credit card
Some banks and credit unions offer student credit cards, and by getting it, you can begin the process of building credit score for future. However, students might feel it quite challenging to use credit cards with restraint as the lure of free money could make them lose their balance in spending. Having a free-wheeling spending attitude can be disastrous because it would result in poor credit score. It is important to act responsibly with credit cards and use it for some specific spending of a fixed amount every month like paying some subscription bill or phone bills. To ensure that you do not miss on payments and make timely payments, set up automatic payments of credit cards for full settlement of monthly bills. Using the card in a disciplined way helps to build a healthy credit score.
Get a secured credit card
If unsecured credit cards are difficult to obtain, you can try to get a secured credit card by paying an initial deposit. As you are paying a deposit for the credit card, the risk of the lender is much less, and you demonstrate your commitment to making responsible use of the credit card as you have high stakes involved. Since the credit is not at all free like an unsecured credit card, you are likely to exercise caution in using the credit card for only essential spending and not indulge in reckless spending because the line of credit is only as much as the deposit you pay. You are using own your money, and it is not free money that encourages uncontrolled spending.
Become an authorized user of a credit card belonging to some family member
To start building your credit score without having your credit card, you can become an authorized user of someone else’s credit card in your family. If your parent or any other family member agrees to include your name on their credit card account, you can start using that credit card. The credit history that you create in the process reflects in the credit report because some credit card issuers report the account activity of authorized users. This is a great way to build your credit score from scratch without taking loans or obtaining a credit card.
No matter how you start building your credit history, act responsibly in maintaining the credit line by making timely payments for full bill value every time. Avoid opening multiple credit lines as it reflects poorly on your credit history.