If you’re a student, having good credit is probably one of the furthest things from your mind. However, building a good credit score can fast track you on the way to future financial goals. You could qualify for a mortgage much earlier. Read more on simple credit score tips for students.You could qualify for lower interest loans on things like cars, personal loans, and lines of credit. Ultimately, you’ll have a more free financial future if you have greater access to credit.So, as a student, what can you do to have a good credit score?Below are simple credit score tips for students:
Tip #1: Get a Credit Card & Use It Wisely!
When you first get a credit card, the limit is probably going to be very low. It’ll likely be under $1000. But this credit card will be a huge boon to you and your credit history.The best possible way to use a credit card is to follow three simple rules. Keep reading on simple credit score tips for students.
One: Make all your payments on time.
Payment history is the most important part of your credit score. Making all of your payments on time will allow you to build up a good credit score pretty quickly.
This allows your balance to start at 0 every month, allowing you to use the credit card without increasing your credit utilization ratio. It also prevents you from paying interest, as your credit card balance is due usually near the end of your interest-free grace period.
Three: Your balance should not exceed more than 30% of your total credit limit.
Credit utilization ratio matters greatly for your credit score. But this is NOT a hard and fast rule. It’s a good benchmark to keep you in the right spot. Going under 30% or over 30% slightly will not change things much.
Tip #2: Remain Frugal with Credit
As a student, you’ll be able to get loans relatively easily. Your student loan provider will seem like they’ll just give you money at any time.However, don’t fall into the trap of using student loans to pay for everything!
Taking out more loans hurts your credit score in the short term and prevents you from being able to pay it down quickly after graduation.
Not everyone is going to be able to pay down the principal on their student loans. But if you can make any payments at all (even if it doesn’t cover the interest), it’s advised that you do so.This reduces the amount of interest that compounds, costing you more money in the long run.
Taking time during the summers and during free time in your schedule to earn an income will help you, even if you can only take home a little bit every month.
This does not have a short term credit score implication, however it will definitely help after graduation!In Summary
Students should get a credit card and learn to use it wisely.
Students should resist the temptation to use student loans for any and all expenses.
Paying down your student loans, with whatever money you have available, will cost you less in the long run and allow your credit to be that much better over time.
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