Student credit: How and why you should start building a good credit

2006-01-19

Learning how to manage your finances is an important task and the sooner you start the better. Becoming a college or university student is usually combined with leaving home and taking care of every day expenses on your own. This is a very suitable time to start building a good credit record for your self. When you leave school, the good credit you have acquired during your time in school can help you to get an apartment, lend money to buy a car or do similar investments. Some companies perform credit checks on potential employees, so a good credit can even increase your chances of getting a job after graduation or a part-time job during your years in school. Even if your student years is a period of your life when you do not have a lot of money to spend, you can build a good credit buy skilfully managing the money you actually have and use them in a smart way.

A good credit history will provide you with a good credit, but the history will of course have to start at some point. One of the most well known ways of building a good credit is to get a credit card and prove that you are capable of using it responsibly over time. Many credit card companies will however not provide you with a credit card unless you can show that you already have a good credit. So, is this an impossible situation? No, as mentioned above your years as a student can be used to build a good credit.

Start off buy looking at your current situation. Do you have services in your name, such as telephone or electricity? Make sure to pay each service bill on time. Paying your bills late or being unable to pay them in full will damage your credit report and it can take years to rebuild a good reputation. You might not think of it, but paying your cellular phone, pager and Internet bills on time will actually help building a good credit. If you do not have your own bank account already, one other important step towards a good credit is to open one in your name. Never overdraw the account, not even with minor sums, since this can affect your credit report.

As mentioned above, it can be hard to get a credit card if you have no credit history. It is however far from impossible. You can for instance start out by applying for a credit card offered by a retail store or gasoline company. Even without a credit history, you can usually obtain one of these cards with a low credit limit as long as you have no negative information on your credit report. Manage your credit card responsibly and never buy anything with the credit card without knowing that you will be able to pay it off.

There are also credit card companies and financial institutions that offer student credit cards for students without a credit history. A so called “Secured Card” or “Secured Student Credit Card” can be a good first credit card. A secured card or secured student credit card requires a deposit and your spending limit will typically be the same as the deposit amount to begin with. If you manage your student credit card responsibly, you might be granted a higher spending limit later or even be issued a normal credit card. A secured student credit card is not only a good way to build a good credit; you will also get the convenience and payment flexibility offered by a normal credit card.

Never apply for a credit card or student credit card simply because the issuing company offers credit to students without a credit history. It is important that you choose your student credit card wisely and take the time to read through the rules and regulations connected to the card. Compare several credit cards companies that offer student credit cards to see which student credit card that is most suitable for you. Once you get your credit card, manage it with extreme care. A major credit card from a reputable bank or financial institution, that you have paid on time each month during your time as a student, will most likely turn out to be the strongest credit reference on you credit report once you have finished school.

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