Building Good Credit

Because, in many cases, most of a college student’s expenses are covered by funding of some kind, college can be a good opportunity to learn to handle credit and start building good credit for the future. What I mean by that is that if your tuition and room and board are covered, in the normal course of things, you will not have enormous spending needs beyond that, and this circumscribed situation can be an ideal context in which to acquire and practice good credit card habits. Read on for further information about building credit.

While some students will finish college and immediately go on to further their education through graduate school or professional training, others will go to work full-time, and quite possibly not in their home-town. When this happens, two major reasons for having established credit may quickly come into view: the need to purchase a car and the need to rent an apartment. Of course, these are not necessities for everyone and circumstances differ: but for many students, college graduation is the turning point after which having a credit history becomes a real boon because both buying a car and renting a living space - not to mention buying an airline ticket, renting a car or booking a hotel room - are much more complicated if you don’t have a credit history.

We know that lots of people don’t have good credit. How do those who do have it acquire it? Here are some steps to follow.

1. Get a bank account or two. Checking and savings is good. A checking account can help you learn about paying as you go. A debit card with either can help you learn about handling "plastic." And having a bank account may make acquiring a credit card easier.
2. Acquire a credit card with a low spending limit. Having a low limit helps you learn to use the card in a safe environment where you can’t get into too much debt, and - beyond that - is a recommended practice for all card holders, not just students.
3. Use the card. A credit card history needs to have some entries in it to be valuable. So, you’ll have to use it to have that happen. Many find that the best way to do this is to create a monthly budget and look for items that you need to purchase anyway that could be placed on your card. Examples include your monthly telephone bill, prescriptions, grocery store items, and food. If you have a checking account and are used to writing checks, you can simply shift some items from check payment to credit card payment.
4. Pay off your balance monthly. This will prevent you from having to pay interest on your purchases, which quickly negates any savings you’ve made by good shopping.
5. Pay your bill early. The mail can be slow. Online payment systems can be down. By paying your bill early, using whatever method you choose, you can avoid late fees and black marks on your credit.
6. Save your receipts. If anything goes wrong with a purchase or you overspend, you’ll be able to clearly see what happened and seek remedies.
7. Check your statement. Another reason that saving your receipts is a good plan is that they’re useful for checking your statement to make sure its accurate.
8. Check your credit report. You are entitled by law to check your credit reports once a year (and more often in some states). Go to the website annualcreditreport.com where you can request your credit report from the three biggest firms: Equifax, Experian, and TransUnion. Check for omissions (building your history with a credit card won’t help much if it’s not listed), and especially for items that shouldn’t be there: addresses that aren’t yours and accounts that aren’t yours. You may find different information on the three reports. Call them and follow their procedures to make any necessary corrections. Frequent checking can help prevent identity theft.

Having established a credit history with a credit card, it will be easier to expand to the world in which you also may have a gas card, a car loan, and a monthly housing payment. The loan, which having established credit with your credit card will help you secure, will further build your credit history, and you’ll be on your way.