Students are uniquely positioned to establish their credit. Lenders and credit card companies realize that they are just starting out and may not have any credit history yet. There are companies that offer credit cards specifically to students to help them establish their credit. If you’re a student looking to establish credit, then you are smart to start early. Things like buying a house or financing an auto loan usually require a credit history, and as a student, these things are most likely in your future.
Establishing credit will let lenders and credit card companies see if you are good at handling finances or not. When you’re in the process of establishing your credit, keep in mind what a lender might be looking for. They want someone who has proven that they can make payments on time. They also want to know that they’ll make some money on the interest that you’ll pay. Therefore, getting a student credit card and paying it off in full every month isn’t necessarily the best thing to do. It’s generally a good idea to pay more than your minimum payment each month to show that you aren’t neglecting the balance all together. Leaving a small balance shows lenders that you aren’t opposed to paying a little bit of interest each month. Don’t run your card up to the limit, or that will make lenders think that you can’t handle having available credit without spending it all.
You want to look as responsible as possible without keeping the credit card company from making any money. A good rule of thumb is to not run your credit up over 50% of your total credit line. Shop around for good rates on student credit cards, but don’t fill out too many applications. Apply for the ones that you believe to have the best percentage rates and the least amount of fees. When you fill out a lot of applications, they appear as inquiries on your credit. This isn’t bad unless it’s a lot. This makes you look like you’re desperate to get a lot of cards. Lenders may see that as an irresponsible move, or decline your request based on the fact that you may have a lot of other cards in route to you.
Paying all of your bills on time will help you when you go to buy a house. This includes cell phone, electricity and even cable bills. These bills, however, won’t affect your credit because you’re paying for a service, not paying off borrowed money. Paying your credit card bills or loan installments is very important. These payments will be on your credit and your payment history for each will be looked at for years to come by prospective lenders and banks. Don’t neglect to make on-time payments to anyone that you’ve borrowed from, even if that means paying your power bill a little late. Credit cards and loans should come first when you pay your bills.
Getting student credit cards can help you establish a good credit score if you treat them with respect. Responsibility is key. Keep these guidelines in mind and you can have a good credit score in just a few short months.
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