Once you turn 18, you will be eligible to build credit. First, you must have a source of income. If you don’t have a job or a regular source of income where you can make money in college, then you should work on that first. The worst thing you can do is open up lines of credit without the means to pay off that debt.
Additionally, once you start building credit, it is important to be responsible with the credit that you are given. Building a clean credit history is ideal.
How to Build Good Credit
With an income, you will be ready to open your first line of credit. Borrowing money and repaying that money is one of the best ways that you as a college student can build a credit score.
A positive payment history is one of the top determinants of a good credit score. If you have maintained on-time payments over a course of many years, your credit score is going to reflect that.
A practical method to build credit without going into debt is to charge a small amount each month, to your credit card and pay it off immediately. You could start by paying your cell phone bill or another small monthly bill with your credit card. Using this method, you will begin to build a stable credit history without accumulating debt.
How to Choose a Credit Card
When searching for a credit card, there are a few details to consider. Check out the rewards and perks that credit cards offers.
Consider the interest rate for the credit card you are considering. Although wise credit usage means that you will strive to pay your credit card off in full each month, there may be a time or an emergency when you might have to pay the balance off over time. In this case, look for credit cards with lower and fixed interest rates.
In addition, some credit cards may have an annual fee. Typically, you will want to find a credit card without an annual fee unless the rewards that come with the credit card are more beneficial than the fee is detrimental.
Next, look for credit cards that have the added convenience of financial controls. Even though you are getting into the habit of using your credit card wisely, it’s possible to slip and miss a payment, or go over your credit card limit.
For example, PNC offers several credit cards with financial controls like spending alerts to help you stay on track. You can set these up in online banking. This way, you can maintain your credit card account in good standing.
Some credit card issuers offer perks like purchase insurance or even an extended warranty when you use your credit card to make a purchase. Both are very valuable, as they offer the opportunity to recoup the purchase price of an item if that item is damaged, lost or stolen. These perks also allow you to benefit from purchase insurance when buying online.
What Good Credit is Good For
Building good credit can do more than help you qualify for a high quality reward credit card. With a better credit profile, you can secure lower rates when you are ready to purchase a home or a car.
Beyond borrowing situations, good credit can also affect your car insurance and utilities rates as well as whether you are approved for a certain cell phone plan.
Credit cards are also valuable should your vehicle suddenly break down. In an emergency situation such as this, roadside assistance comes in handy and many credit cards offer this service as a benefit.
In some industries, a clean credit history is important before a hiring decision is made. For all of these reasons and more, it is important to build a good credit history and protect it with good habits.
Despite potential interest charges for revolving balances, a credit card can be a very useful item to have, provided it is used correctly. Credit cards are particularly helpful in case of an emergency purchase, or if you are faced with an unforeseen circumstance.
Building good credit now can help you in the future as a good credit score means lower interest rates and cheaper borrowing.
While we can't respond directly, if your question is of general interest, we may feature it in future updates to this Q&A section.
Know someone with a fresh take on finance?
What would you like to learn about next?
Pass on the site or a session and spread the financial know-how.
We'll be using suggestions from you and others to develop new Achievement Sessions that address topics you're most interested in.
We'll be using suggestions from you and others to bring new instructors to our learning community. If we plan to start a conversation with the instructor you recommended, we will contact you.