Top 5 Ways College Students Can Build Credit While in School

As a college student, you may not have many opportunities to take on credit accounts and build your credit history, but that doesn’t mean you can’t try. Building your credit score now will give you a leg up after graduation when you need a good credit score to get your own place, buy a car, and even get a job offer (many employers run credit checks as part of the screening process). And even further down the road, a good credit score will help you get the best rate on not only a mortgage loan but also your insurance.

The good news is that these five ways to build your credit don’t have to be complicated or time-consuming. Let’s get started!

1. Make interest-only payments on your student loans.

If you have a Direct Subsidized Loan, the U.S. Department of Education pays the interest while you’re in school.

For other types of student loans, including Direct Unsubsidized Loans and student loans from private, non-government lenders, you are responsible for paying the interest due at all times, including while you’re still in school.

Of course, you can choose not to make interest payments, but this means that your accrued interest will get added to the principal of your loan. When you graduate, you may experience “sticker shock” at how your loan balance has grown from the amount you originally borrowed. And letting your interest capitalize means you’ll pay even more interest overall on the loan.

So, if it’s financially possible for you to make interest payments on any unsubsidized loans you have, you could help establish a good credit history with your payment record. You’ll also have less debt to your name upon graduation, which is good for your overall credit health as well.

2. Put your name on utility accounts.

Some utility companies do a credit check when you open an account for the first time. If you don’t have a good credit score you may need to put down a deposit (refundable when you close the account). However, it’s worth it to overcome that initial hurdle because your on-time utility payments could help your credit score. With Experian Boost, a free service from the credit reporting bureau, you can potentially raise your credit score by up to 13 points by getting rewarded for your on-time utility payments.

3. Get your first credit card.

One of the best ways to build a positive credit history and a good credit score is to demonstrate your ability to handle debt. College students age 21 and older can apply for a credit card on their own. 18-20 year-olds will need a co-signer. A secured credit card, in which you use a savings account as collateral, is another option for college students.

The best way to use your credit card without falling into high-interest debt is to connect it to a recurring monthly bill, such as your cell phone account or Netflix subscription. Pay off the balance every month after the bill payment is processed. Regular use of your card and on-time payments will boost your credit score. And you won’t spend money outside of your regular bills/budget.

4. Avoid using more than 30 percent of your available credit.

If you do have one or more credit cards, your debt utilization can be as important as timely payments. In general, credit bureaus don’t want to see you maxing out your cards. Ideally, you wouldn’t carry a balance at all, but if you do, try not to use more than 30 percent of your credit limit.

5. Review your credit report and score.

To track your progress, take advantage of your right to a free annual credit report from each of the three major credit bureaus through AnnualCreditReport.com. You won’t find your FICO score on these reports, but it will help you track your credit history and open accounts, as well as making sure there’s nothing suspicious.

You can also track your estimated credit score through free apps like Credit Karma and Credit Sesame. These apps offer tips on raising your score; just be wary of the loan and credit card offers they send you. That’s how they make money, but it doesn’t mean you actually need a new account.

To view your official FICO score, you’ll need to pay for it or find a credit card that gives you free access to your score.

Town and Country Bank and Peoples Prosperity Bank is your local partner for building good credit.

We are a community bank serving our customers throughout Central Illinois and the Metro East.. Town and Country Bank and Peoples Prosperity Bank have all the financial products and services you need to build a healthy credit history and reach your financial goals. Learn more about our personal credit cards and personal loan options for your borrowing and credit-building needs. Contact us today or visit your nearest location.