Insights + Resources

Establishing Good Credit in College

Dec 9, 2019

Wallet and Credit Card
After you get that first card, how can you manage your FICO score?

Good credit may open doors. It is vital to securing a loan, a business loan, or buying a home. When you establish and maintain good credit in college, you create a financial profile for yourself that can influence lenders, landlords, and potential employers.

Unfortunately, some college students do not have good credit. In fact, Credit Karma says that the average 18-to-24-year-old has a credit score of 630. A FICO score of 730 or higher is considered good.

What are the Steps Toward a Good Credit Score?

To start, you need to utilize credit. About 15% of your credit score is built on the length of your credit history, so the sooner you purchase goods and services with a credit card and pay off that debt, the sooner you create a record of credit use.

Aim to Reduce the Balance to $0 Every Month.

Does this sound like a challenge? It may not be if you just use a credit card to purchase everyday things. When you start splurging with a credit card, paying off the balance in full can become a problem.

Pay your Credit Card Bill on Time.

Roughly 35% of your credit history develops from your pattern of payments: how on time they are, how late they are. One approach to consider is scheduling automated payments from your bank account, schedule reminders, or just try to pay the bill as soon as it arrives.

Refrain from Applying for 2-3 Credit Cards at Once.

About 10% of your credit score reflects your history of credit inquiries, so if you suddenly apply for another 2-3 cards, you could hurt your score.

Another potentially bad move is jumping from card issuer to card issuer – that is, getting a card, then closing that credit card account and opening a new one after a few months because you find another credit card with better perks. In doing this, you end up giving yourself a shorter credit history per credit card account. However, getting one additional credit card may be worth considering.

What if you have Problems getting a Traditional Card?

If you have no income, you might run into this – or, there might be other reasons that make it hard for you to qualify for one. If this is the case, consider going to the bank or credit union where you have a savings account and applying for a secured credit card. With these types of cards, you transfer some money into an account linked to the use of the card, and that amount represents your credit card limit. You can also ask to become an authorized user on a credit card held by one or both of your parents.

You can Potentially Help your Credit Score in Other Ways.

Consistent bill paying is a plus for your credit history. If you do become an authorized user on a parent’s credit card and they use credit responsibility, just being linked to that account history could help your credit rating. If you are living off campus, you might end up co-signing a lease so make certain you understand your and your roommates’ financial obligations. Financially negligent ones could hurt your credit rating if, for example, you are sharing utilities costs. With financially trustworthy roommates, you may avoid that kind of credit score damage. Lastly, if you move while in college, be vigilant about having your bills forwarded to you, to avoid missing payments.

Tags: , ,

More Insights

May 29, 2020

Information vs. instinct. When it comes to investment choices, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on? The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we may not even be aware … Continue reading “Making Investment Choices”

May 27, 2020

In corporate America, pension plans are fading away. Only 16% of Fortune 500 companies offered them to full-time employees in 2018, according to Willis Towers Watson research. In contrast, legal, medical, accounting, and engineering firms are keeping the spirit of the traditional pension plan alive by adopting cash balance plans.1

May 25, 2020

I’d like for you to meet my friend, Hugh. He’s a retired film stuntman who, after a long career, is enjoying his retirement. Some of what he’s enjoying about his retirement is sharing part of his accumulated wealth with his family, specifically his wife and two sons. Like many Americans, Hugh likes to make sure … Continue reading “The Gift Tax”

May 22, 2020

“Never confuse a single defeat with a final defeat.” — F. Scott Fitzgerald The economic struggles in our country are among the worst we’ve ever seen. In April, a record 20 million people lost their jobs, and 36 million people have filed for unemployment since the COVID-19 pandemic struck in mid-March. Record drops in consumer … Continue reading “Better Times Are Coming”

May 20, 2020

You can sum up the appeal of a Roth IRA in three words: federal tax benefit. Potential earnings in a backdoor Roth IRA grow tax free as long as the owner abides by the Internal Revenue Service (I.R.S.) rules, and withdrawals are federally tax free once you reach age 59½ and have held the Roth … Continue reading “Backdoor Roth IRA”

Insights + Resources >