You filled out all of the necessary forms, everything went through, and now you have your first and very own credit card. Congratulations. If you make your payments on time, a credit card can technically be a free short term loan. A credit card can also spell financial disaster for college students that aren’t prepared to use it responsibly. However, since you’re here reading this article, I’m going to assume that you’re a responsible young person that’s looking to use a credit card to build your credit score.
Before I share tips with you on how to keep a solid credit score in college, I wanted to explain to you the importance of a credit score:
It’s tangible proof of your responsibility level. Potential employers, Landlords, and Lenders will all check your credit score to see how responsible you are. Potential employers may use it as a filtering system. Landlords will simply not want to rent out a unit to a young person that has a poor credit score because this usually means a failure to make payments on time. Lenders (from cars to homes) will either charge you an extremely high interest rate (costing you lots of money) or not loan you the money at all.
Basically, a poor credit score can cost you a job, hurt your chances of finding a place to rent, and limit your options when it comes to a home or auto loan. Do you really want that to happen? This is why you need to pat yourself on the back right now and share this article with as many of your friends as possible. You’re on your way to being a responsible credit card user.
Okay now that you understand why your credit score is important, what exactly is your credit score made up of?
- 35% Payment history. This is pretty much your ability to make payments on time.
- 30% Amounts owed. How much money you owe compared to how much credit you have available to you.
- 15% Length of history. How long have you had your credit card for? How long have you been paying your credit card balance off?
- 10% New credit. The amount of new credit you have compared to old credit that you’ve had. This is where people argue that closing a credit card can hurt your credit score for the short term.
- 10% Types of credit. This is based on the different types of credit that you have available to you.
The last part of this credit score article is designed to help you use your credit card responsibly so that you can build your credit score through college.
Make credit card payments on time.
You must make all of your credit card payments on time. Now I know that shit happens and life isn’t perfect. You just need to understand that 35% of your credit score is made up of your payment history. Do you really want to hurt your credit score by making a late payment? If you do make a late payment, I urge you to call your credit card provider to find out if the late payment has been reported and if it will affect your credit score.
Automate your payments.
When you’re young, one of the best tips for building your credit score is to make consistent payments on your credit card on time. My favorite tip in this area is to automate your fixed payments to be directly billed to your credit card. I’ve setup my online subscriptions, gym membership, and cell phone to be directly billed to my credit card on a monthly basis. The consistent payment of my credit card has allowed me to build up my credit score through college.
Increase your credit score… when you’re ready!
Since 30% of your credit score is based on amounts owed, then technically the more available credit you have without using it, the more responsible you are. My credit limit is so ridiculously high that I don’t plan on sharing it with anyone anytime soon. When you feel that you’ve got a handle of your credit card, you can ask your credit card provider for an increase in your credit limit. This increase in your credit limit will also allow you to place major purchases on your credit card (group trips, television, etc.).
There you go guys! This comprehensive article should hopefully allow you to build your credit score through college.
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