As a college student, you’ll likely think about your near future and how to streamline it so you wouldn’t stress that much about it later.
Of course, one of the things you should think about right now is your future career.
However, you should also think about your financial future, and therefore, your credit score is the first thing you should have in mind.
After you graduate, looking for a job to start your career would be much easier if you already had an established credit score and a good one at that. But first things first – what is credit and how does it work?
What is Credit?
If you think about it, credit has several meanings. Some of them include the credit the bank gives you on your credit card or what lenders give an individual that they have to pay for in the future, along with interest.
However, the credit that we’ll be talking about refers to a person’s credit history or loan repayments, among other things. These other things include:
- Payments in due time
- Amount of money borrowed
- Types of loans and credits
Do remember the things listed above are just the general stuff. It wholly depends on the bank or lender what factors to consider when checking your credit score.
That said, the moment you take bad credit loans online or credit cards is the moment you start to build your credit.
After you open your account, the lender would then report the information about the loan to credit bureaus.
However, you should remember that taking out a loan or a credit card isn’t the only way to build your credit score. There are other things as well, and here are some of them:
Being an Authorized User
A credit card authorized user is a person who has the permission of the credit card holder to share the credit card but isn’t responsible for paying the bill.
For personal credit cards, the authorized users are often family members. Depending on the credit card issuer, the authorized user will be given another card linked to the primary account holder.
But what privileges does the authorized user have? Authorized users are typically given reports on stolen or lost cards and information on credit limits, fees, and available balances. They can also make disputes on billing and make payments themselves.
However, they can’t add another authorized user, change the PIN or the address, or close the account.
A credit card authorized user is typically not liable for the payments charged to the account. However, sometimes, they are expected to pay for any purchase they make with the account, but that’s usually an agreement between the authorized user and the primary account holder.
For example, say there’s a couple where the other is an authorized user while the other is the primary cardholder. When they split up, any money owed by the authorized user can be paid for by giving the authorized user access to the account to pay the amount themselves.
Student Credit Cards
If you didn’t know about student credit cards, you might be confused about the whole idea. But the gist of it is, yes, students can get credit cards.
These cards are specialized for students who are in a college or a university but don’t have the income yet to be approved of a conventional credit card.
Like any credit card, a student credit card allows them to spend money they don’t have yet, which they will pay later on.
Student credit cards tend to have a lower borrowing limit than a standard credit card, which ensures that students will be more responsible about their spending. However, they tend to have a high-interest rate.
Also, the borrowing limit and interest rate are based on the student’s borrowing history and finances.
Because the person is still a student, this won’t be extensive. But as their credit improves, they can transfer to accounts with a higher borrowing limit and lower interest rate.
Reporting Your Rent to Credit Bureaus
There’s probably one question in your mind right now: “Really?” And the answer to that is “yes”.
All three major credit bureaus, Experian, TransUnion, and Equifax, will include your rent payments in your credit report if you give them that information or if your landlord does. They will then give the information to two major credit scoring companies, FICO and VantageScore.
However, you should note that simply paying your rent doesn’t change your credit score, reporting does.
That is why before you report your rent payment to any credit bureaus, you should check first if your landlord is already with a service.
There are a lot more creative ways to build your credit as a student. It will be a struggle, yes, especially since you’re just starting.
But once you establish a stellar credit score, taking out loans and credit cards, and finding a job will be much easier in the future.