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How to Build Good Credit
12 Feb 2019

Learn How to Build Good Credit as a Student

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College is a crucial time for students to prepare for their financial futures. And the average student leaves school with nearly $40,000 in student loan debts.

More and more, college students are in need of financial head starts. And building good credit is the key to financial freedom.

But not every college student knows how to build good credit.

There’s no need to stress. We’ve picked out the best ways to build credit in college, so students can kick off their post-college life on solid financial ground.

Why Good Credit Is Important

Credit is an agreement between the bank, or lender, and a person. The bank usually lends a person money and expects that person to pay the money back under specific terms. This is where good credit comes into play.

If someone has a good credit score, it means they are less of a credit risk. Basically, that means they have shown they can borrow money and pay it back responsibly.

This credit score usually runs on a scale of 300 to 850. And the higher the score, the better the credit.

That score is important because it’s what lenders use to decide how much they are willing to loan or what restrictions they plan to put on the money. Simply put, it’s riskier to give money to someone with a low credit score because the lender has less evidence showing they will get their money back.

College students usually don’t have a ton of spending money during their studies. But a good credit score is crucial later in life when they want to borrow money for things like a house, car, or business.

Good credit scores also can help recent graduates grab lower interest rates on student loans when they refinance. And it’s usually a factor in background checks and apartment rentals down the line.

How Credit Scores Are Calculated

Where does this important credit score come from? When a person borrows money through something like a credit card, the lender records activity. Then the company will report that activity to the credit bureaus.

The main credit bureaus include three main groups: Experian, Equifax, and TransUnion.

The activity that’s reported to these groups usually includes things like payment history. It might also consider how much money was owed at a time and how long a person has had credit history. A combination of those reports makes up a credit score.

This is why building credit with a credit card is a smart move for college students. College is a chance to create a good credit score before students have to borrow money for big purchases.

How to Build Good Credit

It’s a good move for college students to have some credit after school, but credit card debt can be crippling. In fact, some surveys have found students nearing graduation average nearly $3,000 in credit card debt.

That has a doubled negative effect on college students. It means they are starting out behind financially. But it also means their credit scores might be starting out in bad shape.

A lot of that debt comes from interest or penalties from late payments. Plus, not paying on time can negatively affect a credit score. It’s not impossible, but it’s harder to get good loans with bad credit.

But there are ways college students can build credit with credit cards the right way.

Start Using a Credit Card

According to some studies, college students with credit cards have better credit than students who don’t. In fact, students with credit cards averaged 50 points higher.

Students can usually qualify for student credit cards. These cards let cardholders spend less by limiting the credit. But they often provide perks for good grades or give other rewards.

Use a Credit Card in Moderation

It’s good to realize that along with the perks of a credit card comes the responsibility of debts. It’s wise for college students to use credit cards sparingly.

A good way how to build good credit using a card is paying only recurring charges with it. That might be a predictable statement like a phone or Netflix bill. These costs are usually about the same every month.

That means a student is less likely to be caught off guard and go over their budget.

Another way to build credit with credit cards is to know the due dates and set up automatic payments. It can be hard to remember payment deadlines. Automatic payments can keep students from accidentally paying late and wracking up interest.

It’s also a good idea to save extra money for emergencies. And unplanned medical expense or a car repair can dry up a bank account fast.

That makes it a smart move to leave some wiggle room and not risk hurting credit if dire times come up.

Keep it to One Card

It might be tempting to grab several cards as a student. After all, different cards can offer tantalizing perks.

But in order to build good credit, it’s smart to avoid multiple cards. Every card has a payment deadline to remember. Multiple deadlines to juggle makes it easier to miss a payment.

It also can mean missing one payment multiplies into several financial problems. Instead of dealing with one penalty, the student suddenly could have several from different cards.

Instead, college students should pick a card with low interest payments and no annual fees. It’s best to choose a card with a clear billing policy.

To start out, a college student may want to pick a card with a lower spending limit and fewer fancy rewards. This can encourage moderate spending.

And it could help a college student learn to spend wisely early on.

Be an Authorized User

Wondering how to build good credit without an individual credit card? One way is to become an authorized user.

That means getting permission to use someone else’s credit card. This sometimes means students can hop on their parent’s card and pick up benefits. It’s also a good chance for parents to keep an eye on spending.

But it’s smart to spend in moderation as an authorized user too. If the student overspends or is late making payments, it could hurt credit for the student and the person in charge of the account.

Report Rent Payments for Better Credit

Students don’t have to have a credit card to build good credit. One card-less way to build good credit is to report housing payments to credit bureaus.

Programs like and RentTrack will monitor rent. And they will send reports to credit bureaus. As long as payments are made on time, these payments should help boost a student’s credit score.

Stay Away from Co-Signing for Others

Students might need to rely on other adults to get credit rolling. But it can be dangerous for a college student to co-sign for a friend.

Just the way a student can wreck the credit of a primary cardholder, that college student’s credit could be ruined by a friend. That’s why it’s a good idea to avoid co-signing as a college student.

In the same way, it’s smart to avoid letting friends be authorized users. One mistake can lower multiple credit scores.

Keep Track of Credit Reports

College students should keep an eye on their credit reports. Credit information comes in from several different areas and goes to a few groups. That means it isn’t uncommon for mistakes to come up.

It’s a good idea to check credit reports for problems. That might include something like a report for a different person or payments that were mistakenly marked as late.

If errors are spotted, it’s a good idea to let the creditor know about it. And that information should also be relayed to the credit bureau to fix the error.

Build Good Spending and Borrowing Habits

Before focusing on building credit as a college student, it’s smart to build a budget. Make sure a consistent income is coming in and set up money for emergencies. This will protect against surprises that could derail credit.

Student loans are another good way to build credit in college. Just like a credit card, paying student loans on time can boost credit.

That means college students should only take out student loans for things they absolutely need. And making payments while still in school can stave off costly interest later on.

When graduation comes, payments should be made on time and in full. This will help improve an overall credit score.

And that also goes for other bills. It’s a good idea to pay utility bills, taxes, or tickets on time. Some credit bureaus could use these types of things to determine a credit score.

Healthy Finances from Credit and Beyond

These college student tips show how to build good credit. And good credit can be crucial in starting post-college years with cash.

But there is plenty more to finances beyond good credit.

Want to stay up to date on the latest money-focused news, tips, and advice? Check out our blog here for the newest info on loans, lending, and credit.

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