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Why Building Credit in College is Crucial

poorcreditscoreIf you are planning to head off to college, then last thing on your mind right now is your credit score. While you may have tucked your thoughts about credit into the back of your mind, it is time that you bring those thoughts back into focus because it is important to build your credit while you are away at college.

You may be thinking right now that you can’t possibly understand why you should build your credit now, as you will have years to do it after graduation. Thinking like this can actually set you up for failure in the future. Below, we will go over some of the reason why you need to build your credit now.

It Will Teach You to Budget

One reason you should work on building your credit in college is because it will also teach you to budget. When you have a credit card, you will quickly learn that you cannot spend money simply because you are allowed to. In fact, if you do this, you will actually damage your credit score if you cannot pay the money back.

Some students enjoy having a secured credit card in their possession because it does allow them to build their credit without the worry of going negative or falling into debt from using the card.

If you want to build your credit, you should start out with one card and then add a second one later on. To limit your spending even further, choose a credit card that is store specific, that way, you won’t be tempted to use it elsewhere.

You Can Apply for a Mortgage or Auto Loan

While you are probably not thinking about buying a home or vehicle right now, you will want to at some point and having a solid credit score will help you. As you work your way through college, you should be building your credit now to secure your future.

If you ruin your credit score, it is hard to get it back and will take a lot of work to do so. In fact, many people who ruin their credit score too much will find that they are unable to receive approval for anything they apply for. Having items such as a charge off on your credit report can bring your credit score down considerably.

Therefore, if you work hard to build your credit now, it will pay you back in the end when you are ready to purchase your dream home or car.

You Can Apply for Student Loan Refinancing When the Time Comes

Later on down the road you may find that you want to apply for student loan refinancing and to do so, you need to have good credit. In fact, a financial lender will not approve your application if you have a poor credit score and a bad credit history.

Student loan refinancing is beneficial when you want a lower interest rate or lower monthly payment. If you find that you are having trouble affording your student loan payments, refinancing is an option in most cases.

How to Build Your Credit

Now that we have talked about WHY you should build your credit, you are probably wondering HOW to do it. Let’s go over some ways.

Use That Card

Above we talked about how you should use a credit card to budget for yourself. This is a great idea, but you should never just have an open account and not use it at all. To help you build your credit, take something that you do on a monthly basis and use your credit card to purchase it, then pay it off. Since you are already used to paying for this item or activity, you can use your card and then pay it off immediately without dipping into your savings account or into additional money.

Pay on Time

Always pay your bills on time. Never let one of your bills go late and if it happens to for one reason or another, pay it immediately. When you do not pay your bills, you ruin your credit score and it takes longer to build up your credit than it does to destroy it.

If you are getting ready to head off to college, it is important that you focus on building up your credit to prepare yourself for the future.

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3 Responses to “Why Building Credit in College is Crucial”

  1. Genaro Ochoa Jr says:

    Just tax the 1% and then it could be more afforable,or instead of investing money into private prison lets try to invest that money into higher education for low income areas.

  2. As a college student, building credit may not be of focus and should not be made complicated as focus is often elsewhere. Having too many credit cards becomes much too overwhelming to keep up with so start off with only maintaining one or two credit cards ensuring to only charge what you can afford to pay off at the end of each month. This sounds simple and it is. Many young adults do not realize the impact of how poor credit will effect them later in life so keep it simple, organized, and on budget!

  3. Rebuilding your credit whilst you’re still in college can be done entirely on your own, or with the assistance of a credit counselor. Not many people realise just how much of an impact this three digit number will have on your entire financial life. Inaccurate credit reports can easily damage your ability to buy a home, rent an apartment, lease or buy a car, obtain credit, get a job, or even open up a bank account. Far too few students realise the importance of building and maintaining a good credit rating.

    The quickest and most effective way for a student to improve their credit score is to make down payments on your debt. Your debt to credit ratio is 30% of your credit score, next in importance only to credit history, so reducing the amount of total debt accumulated versus how much available credit you have is the most efficient and effective way to reduce your FICO score. If you aren’t able to pay the balances down, the next best thing is to divide and conquer. Divide the balances more equally among your credit sources if possible so that no one card is maxed out but they are all as low as possible. The best standard is to use no more than 50% of your available credit at any given moment. This shows prospective lenders, employers, landlords, and others that you are able to have credit without incurring outrageous debt and that makes you seem a very good risk.


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