College · October 29, 2020

Building Credit as a College Student Can Help You Throughout Life

College is often a transition point for students, from childhood into adulthood and from student to professional. During those in-between years, your parents may share your financial burden so you can focus on your studies, relieving you of the pressures of budgeting and money management. But those responsibilities could fall to you come graduation. Building credit as a college student gives you a leg up when you enter the professional world.


Why good credit matters

A good credit score has long-term implications, not just for your finances immediately after college but for your long-term goals. Depending on your chosen career field, your employer may run a credit check as part of the hiring process, influencing your earning opportunities. Many landlords and property management companies also run credit checks, so a good score will help you get your own apartment post-graduation.

Your credit score reflects many factors, such as how much credit you're using and whether you have a history of on-time payments. Down the road, your score may determine whether you're approved for a mortgage or a car loan. The longer your history, the better, because you've had more time to demonstrate that you use loans and credit cards responsibly. 

Your credit score also influences how much interest you'll pay on new loans and credit accounts. Lenders often reward high-score borrowers with lower interest rates because they're considered lower-risk than someone with poor credit.

5 ways to build your credit

Here are some strategies to help you get started solidifying your credit history while you're still completing your higher education.

1 Open a credit card

Qualifying for a card can be tough initially if you don't have a credit history. But you can ask your parents to add you as an authorized user to one of their cards, which will allow you to establish a credit record. Their credit line will appear on your report, and that activity helps build your own financial profile. You can also apply for student cards, some of which even include rewards points and other perks.

2 Make small monthly purchases

You don't want to max out your credit line, but regularly using and paying on your card shows you're responsible with your spending. Consider putting one or two expenses, such as gas or groceries, on the card. Create a budget so your monthly balances don't become bigger than you can handle, and resist the urge to use the card for splurge items. As nice as it is to treat your friends once in a while, remember that the credit card is a tool for building your financial future.

3 Pay your credit card bill on time each month

Even better, pay it on time and in full. Interest accrues quickly, even on small balances, and you can end up paying hundreds of dollars on what were originally small expenses. This is another reason to keep your charge amounts low. Filling the gas tank, picking up a case of bottled water or replenishing your stash of notebooks should be easy to pay off every month.

4 Look for additional opportunities to build credit

When possible, have utility bills and rental agreements put in your name. While rent isn't automatically reported to the three credit bureaus, you can sign up for services that will do this for you so lenders see your history of on-time payments.

5 Know your student loan repayment terms

The months after graduation can be overwhelming as you start a new job and possibly move into your own house or apartment. Although you have a 6-month grace period on federal student loans, that time passes quickly, and it's easy to become overwhelmed once those payments begin. Find out when your grace period ends and how much your monthly payments will be. Then, save up enough to cover the first couple months. That may be challenging, especially when you're new to your job. But you don't want to get behind or default on your loans, which will undo all the hard work you put in to building good credit. You can also look into deferment terms to give you some relief if you can't make payments for a while.

Get a head start

You've already got plenty on your plate with classes and internships, so building credit as a college student may seem out of reach. But you can start small, with one card, and develop the habit of managing a monthly bill. By the time you graduate, you'll have created a record of financial responsibility that will open doors to your future, both literally and figuratively.

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.