How to Start Building Credit in College
Building credit is something most college students know they need to do. Establishing a credit history and having good credit are musts for becoming financially independent – without it, it can be very difficult to qualify for loans, rent an apartment, and even get certain jobs – but knowing where to start can be confusing. We break down some simple strategies on how to start building credit below.
How do you build credit?
Become an authorized user on your parents’ credit card account
Simply put, being an authorized user on your parents’ account basically means you’re using their credit card, but you have your own card with your name on it. When you’re building credit, this the best of both worlds. You can buy things on the card like it’s yours, but it’s still the primary cardholder’s legal responsibility to pay for the charges. You might have to pay your parents back, but hey, you’ve got plastic!
As long as your parents maintain a good credit history by making on-time payments without carrying a large balance, your credit report will get a boost. The credit card company should report the account activity to both your and your parents’ credit profiles, but you can always check first to see if the credit card company reports authorized user accounts to credit reporting agencies.
Apply for a secured credit card
If you know you’ll always be able to pay off the balance every month, think about applying to get your own secured credit card. A secured credit card requires you to put down a cash deposit (usually equal to the same amount as your credit limit on the card) to open an account, reducing risk to the credit card company. Like being an authorized user on someone else’s credit card, this is a good way to build credit, and the required deposit makes it easier for people with a short credit history (or bad credit) to open an account.
A good tactic when getting your first credit card is to use it only for small purchases (like gas or your Netflix subscription), then pay the balance off in full every month. Avoid the urge to splurge to prevent your credit balance from ballooning to an amount you can’t afford to pay back.
Credit cards aren’t one size fits all, so make sure you do your research before you apply for one. Things like annual fees, interest rates, and credit limits can vary from card to card. It’s important to know what you’re getting into before you sign up.
Apply for a student loan
As a college student, you might already have student loans, and the good news is, they’re helping you build credit! Any student loans you’ve borrowed, whether federal or private (even if you have a cosigner), are reported on your credit report when they’re taken out.
Keep your student loan balance as low as possible to make it easier to make on-time payments on it in the future. This will help you build credit history without getting into debt you can’t manage.
Stay on top of your student loan payments
Missing student loan payments can have a big negative impact on your credit score. Don’t just rely on your loan servicers to remind you when you need to pay your student loans. Set reminders each month to make your payment on time, or set up an auto-debit to minimize the worry. (Bonus: Many private lenders offer a discount on your APR if you sign up for auto-debit.) If you know you’re going to have trouble making a payment, contact your loan provider. Chances are, they’ll be willing to work with you if you reach out beforehand to let them know of the problem. After you miss a payment or two? Not so much.
NOTE: You don’t have to wait until you have to start paying off your student loans to make payments. If you can, start paying off your student loans while you’re still in school to minimize debt after graduation. Even if you’re only making interest payments, it can make a big difference in the amount you have to pay later!
Pay your bills on time
Credits cards and student loans aren’t the only things that affect your credit. Even things like cell phone bills, paying your rent, and utility payments can be reported to a credit reporting company. Always pay your bills on time to prevent a missed payment from hurting your credit.
Don’t apply for too many accounts at once
It may seem like a good thing to do when you’re trying to build credit, but credit inquiries (where companies ask a credit reporting agency for your credit report after you submit an application) can lower your credit score, especially if you have multiple inquiries in a short amount of time. People with short credit histories can especially be seen as riskier borrowers because they don’t have a long track record of paying off their debt. Keeping your number of credit accounts low shows credit reporting companies that you are a responsible borrower, and using the accounts you do have wisely will help build a positive credit history.
Dos and Don’ts of Building Credit in College
The bottom line is, managing money responsibly, making payments on time, and keeping balances low are key to building good credit. Here are some dos and don’ts to keep in mind.
- DO start building credit early
- DON’T get a credit card if you can’t pay it off in full—and on time— every month
- DO keep your student loan balance as low as possible
- DON’T miss any loan payments
- DO pay your bills on time (including rent, utilities, cell phone bills, etc.)
- DON’T try to open a lot of accounts at once
What to do next?
Private Student Loans vs. Direct Stafford Loans
How to Find a Cosigner
Compare Featured Lenders
- Variable Rates: 1.13% APR - 11.23% APR. Fixed Rates: 3.50% APR - 12.60% APR. Lowest rates shown include the auto debit discount.1
- Choose from multiple repayment options, including no payments while in school1
- No origination fee or prepayment penalty2
- Cover up to 100% of your school-certified college expenses like tuition, fees, books, housing, meals, travel, and even a laptop for the entire school year3
- The only undergraduate student loan that offers 4 months of Chegg® study help 4
This loan is for undergraduate students at participating degree-granting schools. Students who are not U.S. citizens or U.S. permanent residents must reside in the U.S., attend a participating school in the U.S., apply with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident) and provide an unexpired government-issued photo ID to verify their identity. Applications are subject to a requested minimum loan amount of $1,000. Current credit and other eligibility criteria apply.
1Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan's Current Principal at the end of the grace/separation period. Payments may be required during the grace/separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a freshman with no other Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment, if available for the loan.
2Although we do not charge a penalty or fee if you prepay your loan, any prepayment will be applied as outlined in your promissory note-first to Unpaid Fees and costs, then to Unpaid Interest, and then to Current Principal.
3Loan amount cannot exceed the cost of attendance less financial aid received as certified by the school. Sallie Mae reserves the right to approve a lower loan amount than the school-certified amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half time.
4This promotional benefit is provided at no cost to borrowers with new loans that disburse between May 1, 2021 and April 30, 2022. Borrowers are not eligible to activate the benefit until July 1, 2021. Borrowers who reside in, attend school in, or borrow for a student attending school in Maine are not eligible for this benefit. Chegg Study® offers expert Q&A where students can submit up to 20 questions per month. No cash value. Terms and Conditions apply. Please visit http://www.chegg.com/legal/smtermsandconditions for complete details. This offer expires one year after issuance.
Information advertised valid as of 7/22/2021
SALLIE MAE RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS, SERVICES, AND BENEFITS AT ANY TIME WITHOUT NOTICE. CHECK SALLIEMAE.COM FOR THE MOST UP-TO-DATE PRODUCT INFORMATION.
Sallie Mae, the Sallie Mae logo, and other Sallie Mae names and logos are service marks or registered service marks of Sallie Mae Bank. All other names and logos used are the trademarks or service marks of their respective owners.
Sallie Mae loans are made by Sallie Mae Bank.
Edvisors is not the creditor for these loans and is compensated by Sallie Mae for the referral of Sallie Mae loan customers.
© 2021 Sallie Mae Bank. All rights reserved. SLM Corporation and its subsidiaries, including Sallie Mae Bank are not sponsored by or agencies of the United States of America.
- Competitive fixed and variable APRs starting at 1.04%1
- Multiple repayment options including: full principal and interest, interest-only, deferred, and flat payment
- Flexible payment terms ranging from 5, 8, 10, and 15 years2
- Coverage up to 100% of your school-certified cost of attendance ($1,000 minimum)3
- No origination, application and processing fees, no fees for early repayment
- Apply online in 3 minutes and get an instant credit decision
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 7/22/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
- Competitive fixed & variable rates starting at 3.99% APR1
- Flexible 5, 10, or 15-year terms
- Award-winning customer service every step of the way
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate (ACH discount) by agreeing to automatic payment withdrawals once in repayment, which is reflected in the APR shown for Full Principal and Interest Repayment Plan loans. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 0.99 as of April 25, 2017.
Under the Full Deferment Repayment Plan option, interest and principal may be deferred while a borrower is enrolled in school on at least a half time basis, and for an additional six month grace period (up to a maximum of 60 consecutive months) following (i) graduation, (ii) termination of enrollment, or (iii) if a borrower ceases enrollment on at least a half-time basis, at which time interest is capitalized and a 60-month repayment period (5-year term), a 120-month repayment period (10-year term) or a 180-month repayment period (15-year term) begins. There are three other Repayment Plan options available, an Interest Only Repayment plan, in which principal will be deferred and payments made on interest only during the same period described above after which payments will increase to full principal and interest payments, a Flat Repayment plan, in which payments of $25 will be made during the same period described above after which payments will increase to full principal and interest payments, and a Full Principal and Interest Repayment plan, in which payments will begin immediately after disbursement. A borrower's actual APR may vary depending on the repayment option selected by the borrower. The dollar amount of the origination fee is based on the amount borrowed and will be added to the outstanding loan balance upon disbursement. Loans are not offered or endorsed by the educational institution that you are attending. CommonBond is not affiliated with any educational institution.
For more information, visit https://commonbond.co/disclaimers#note3.