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Building Your Credit: A Guide for College Students

For most high school graduates, heading off to college is the first step into adulthood.  It’s an exciting time, being on your own and developing a greater sense of responsibility.  It’s also a great time to build your credit so that when you graduate and hopefully land your dream job and dream salary, you will be in good financial health.  Here are some easy ways to help build your credit score.

Become an “Authorized User”

An “Authorized User” is someone who has been given authorization to transact on another individual’s credit card.  The responsibility for the debt remains with the card owner; however, the behavior of the card owner may also be reported as if it were your own.  If you have a good and trusting relationship with your parents, a legal guardian or another family member, this could be a good option for you.  Before taking this approach, be sure to check with the credit card issuer to ensure they will report the authorized user account.  Also, keep in mind that any late or missed payments of the credit card owner may adversely affect the authorized user’s credit, so choose wisely.

Obtain a Co-Signer

If becoming an authorized user is not possible, think about applying for your own credit card with a co-signer.  For those under 21, the Credit Card Act has prohibited credit card companies from marketing credit cards to college students, making it more difficult to obtain a card.  Applying with a co-signer can help you to qualify for a card.  Keep in mind that not all credit cards are created equal, so do your research and choose the right card for you.  If possible, select a secure credit card with which you put down a deposit that will give you access to a line of credit in the same amount.  Secure cards tend to be less risky, so the chance of approval is better.  Also, be aware of cards with high interest rates.  For those with limited credit, credit card companies typically charge a higher rate of interest.  If you aren’t disciplined with spending, those high rates can get out of hand fast, making it more difficult to pay down the card balance.

Pay Bills on Time

While this may sound obvious, making sure your bills are paid on time is another great way to help build credit.  Whether it be student loans, car loans, rent or utility bills, making timely payments provides a reliable history of your credit worthiness.  When using your credit card, make small purchases and don’t over utilize your credit limit.  Paying off your balance each month also reflects nicely on your credit score, so be mindful of your spending habits to ensure it’s feasible.

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