With Labor Day long over, the back-to-school season is now in full effect. That said, those entering college need to be concerned with more than just passing their next big O-Chem test — they need to start building their credit scores (or at least work to ensure that they don’t easily ruin them). While no a credit score won’t affect a student dramatically while in school, a low credit score can affect them long after college—for example, it can be the determining factor for whether you get approved for future loans or whether you can buy your dream home or car. That said, below are some simple tips that can guide you on how to start building (and maintain) your credit score while in college.
Open a Checking and Savings Account
If you do not already have one, it’s important that you get a checking or savings account (preferably both). Using a debit card for transactions won’t build your credit score per say; but if you treat your account with care and are responsible with your money you will then start to earn your bank’s trust. This trust may be the reason why your bank finally offers you a credit card or will approve your application for one. And credit cards are important. They do actually help build your credit score.
Just make sure that when using your checking account that you never over draft, meaning you never ever want a check to bounce or swipe your debit card to pay for something when you don’t have the funds. Bounced checks don’t get directly reported to credit bureaus. But what happens all too often is that the client who received the bounced check—i.e. the store, apartment manager, etc—will send out those bad checks to collection agencies to force you to pay up.
At this point the collection agencies will in fact report you to all three different credit bureaus. And naturally the more complaints you have filed with collection agencies, the more negatively it will affect your score. Even something as minor as a $10 bounced check can do some major damage in the long haul.
Make Timely Payments
That said, you also want to make sure that you pay all of your bills on time. What will happen if you don’t? You guessed it. You will be reported to a collection agency. Often times bills that are a few days, may be even a few weeks late will go unreported and the business owner for example will give you some leeway to pay the bill. But this is not guarantee and some owners will immediately report you to a collection agency. To avoid this from happening, make sure that you are extremely organized and write the due-dates on a planner or calendar so you can visually see when each bill is due.
A better alternative is to set up a paper billing method through your bank so you can pay all of your bills electronically with a click of a button—the business owners/departments get the payments right away and you don’t have to worry about postage stamps and envelopes. If you know that you do not have all of the money, it’s important that you call immediately and set up some form of payment plan—even paying half of the bill will keep you out of a collection agency’s hands temporarily.
Limit the Amount of Credit Card Spending
Like stated before, credit cards are actually good and can help you build your credit score. But if used improperly, they are the fastest ways to ruin your score as well. That said you should aim to get at least one credit card while in college and only use it to make a few small purchases every month.
When your statements come in, pay off your bill as soon as you can—you don’t want to risk getting into credit card debt or get sent to a collection’s agency. You also want to make sure that you never charge more than half of what your credit card limit is—this will negatively affect your credit score a well.