You check your grades, emails, and missed calls, right? But have you checked your credit score?
If you read this with a glazed look over your eyes, it’s OK—in college, I also had no idea what a credit score was or why it’s so important. Until, like Sasha, I tried to rent my first apartment. I didn’t have a long credit history. “That can’t be so bad,” I thought. At least it’s not bad credit, right?
Well … I had no way to convince leasing offices that I’m capable of punctually paying rent. To them, I was still a risk!
Ashley wrote a thorough post here on the SALT™ Blog about credit score calculations, which I highly recommend you read.
Thankfully, my father guided me through college and helped me begin to build credit. Everyone’s financial situation is unique, but if you have a little income in college, you can begin to build your credit history by doing three simple things!
Watch Your Favorite TV Shows
Easy enough, right?
According to Ashley’s article, 35% of your credit score (“FICO score” is its proper name) is based on payment history. This means the first goal for building credit history is to be consistent! Start lines of credit that you KNOW you will pay on time. For me, that’s inexpensive subscription services, like Netflix, Hulu Plus, and HBO Go.
In college, I lived in a dorm, so I had no rent or utilities to pay—it was all through financial aid. I didn’t have a car, so no monthly car note either. However, I had a paid internship and a small research assistant job, so I could afford those monthly subscription services. For $10/month, you could build your credit and catch up on Breaking Bad and Scandal! Win-win!
Pay Your Student Loans (Kind Of)
With my minimal wages, I definitely couldn’t afford to pay back my student loans, but I could afford the interest accruing on them. If you can manage it, don’t wait until the grace period is over to begin paying back your student loans. You could easily spend the first few years of your entry-level job chipping away at just the interest instead of your principal balance.
Unfortunately, it’s common for students to apply for financial aid without really knowing what it all means. Subsidized? Unsubsidized? Stafford. Perkins. PLUS. Huh?? Set up a meeting with your financial aid adviser or a similar service available at your university to look at your options.
And, if you haven’t already, take a look around this blog and visit saltmoney.org to get a better understanding.
Ask The Bank Of Mom And Dad
Because of the CARD Act of 2009, it may be difficult for you to get your own credit card. However, you can still build credit this good old-fashioned way. If you’ve proven to be responsible and your parents have great credit, ask if you can become an authorized user on their credit card. Hey, closed mouths don’t get fed!
Once they report you as an authorized user, when they pay the bill on time (like Grown Ups do, right?), you enjoy the benefits of a consistent credit history. Since they can monitor your spending and keep you in check, you should all agree on your card usage. Maybe you only use the card for textbooks or other consistent purchases.
If you are able to get your own card, resist the temptation to open up multiple accounts. That can negatively affect your score and make you seem like an unstable borrower. Slow and steady wins the race!
Hopefully these tips help! I’m still on the road to building my credit and being a responsible and reliable borrower. If there’s ever a home or business in my future, I want to ensure that the financial choices I make now have a positive impact!
Know of an easy way to build your credit? Share it below.