3 Simple Credit Tips For Students

Simple Credit Score Tips for Students

If you’re a student, having good credit is probably one of the furthest things from your mind.

However, building a good credit score can fast track you on the way to future financial goals. You could qualify for a mortgage much earlier. You could qualify for lower interest loans on things like cars, personal loans, and lines of credit. Ultimately, you’ll have a more free financial future if you have greater access to credit.

So, as a student, what can you do to have a good credit score?

Tip #1: Get a Credit Card & Use It Wisely!

When you first get a credit card, the limit is probably going to be very low. It’ll likely be under $1000. But this credit card will be a huge boon to you and your credit history.

The best possible way to use a credit card is to follow three simple rules.

One: make all your payments on time.

Payment history is the most important part of your credit score. Making all of your payments on time will allow you to build up a good credit score pretty quickly.

Two: pay off the balance every month in full.

This allows your balance to start at 0 every month, allowing you to use the credit card without increasing your credit utilization ratio. It also prevents you from paying interest, as your credit card balance is due usually near the end of your interest-free grace period.

Three: your balance should not exceed more than 30% of your total credit limit.

Credit utilization ratio matters greatly for your credit score. But this is NOT a hard and fast rule. It’s a good benchmark to keep you in the right spot. Going under 30% or over 30% slightly will not change things much.

Tip #2: Remain Frugal with Credit

As a student, you’ll be able to get loans relatively easily. Your student loan provider will seem like they’ll just give you money at any time.

However, don’t fall into the trap of using student loans to pay for everything!

Taking out more loans hurts your credit score in the short term and prevents you from being able to pay it down quickly after graduation.

Tip #3: Pay Down Your Student Loans (if you can)

Not everyone is going to be able to pay down the principal on their student loans. But if you can make any payments at all (even if it doesn’t cover the interest), it’s advised that you do so.

This reduces the amount of interest that compounds, costing you more money in the long run.

Taking time during the summers and during free time in your schedule to earn an income will help you, even if you can only take home a little bit every month.

This does not have a short term credit score implication, however it will definitely help after graduation!

In Summary

• Students should get a credit card and learn to use it wisely.
• Students should resist the temptation to use student loans for any and all expenses.
• Paying down your student loans, with whatever money you have available, will cost you less in the long run and allow your credit to be that much better over time.

How do I know if I have a good credit score?

There are many different types of credit scores, so the score considered good varies based on which scale you are using. However, the most commonly used score is your FICO score, which is broken down like this:

• Exceptional: 800+
• Excellent: 740 to 799
• Good: 670 to 739
• Fair: 580 to 669
• Poor: 579 and below

What factors make up my credit score?

Your FICO® is made up of five factors:

• Payment history: 35%
• Credit utilization: 30%
• Credit age: 15%
• New credit: 15%
• Types of credit: 10%

How can I improve my credit?

• Consider credit repair and contact a credit repair service
• Always pay your bills on time
• Deal with past due accounts
• Reduce your credit utilization
• Keep old credit accounts open
• Open new credit (but avoid applying for too much new credit)
• Monitor your credit

About The Author

Ashley Davison

Director of Operations, Credit Saint LLC

Ashley is currently the Chief Operating Officer for Credit Saint, previously working as a Logistics Coordinator at Ernst & Young. She is currently working toward an Executive Leadership Certificate from Cornell University.

With a degree in education, she is eager to teach the world everything she knows and learn everything that she doesn’t already know! Ashley is a FICO® certified professional, a Board Certified Credit Consultant, Certified Credit Score Consultant with the Credit Consultants Association of America and holds a Fair Credit Reporting Act (FCRA) Compliance Certificate.

Articles by Ashley Davison

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