Apply For Student Credit Cards And Build Credit

About Credit

You might not need credit now, except for school credit, but you will probably need it when you graduate. If you want to buy a car or a house, you need good credit to do that. Your credit score will become as important, if not more so, than your grade point average and your SAT scores were to get you into college. Everyone who loans money or rents homes or apartments looks at your credit score, a three-digit number that indicates how creditworthy you are. Student credit cards allow you to build credit while you are still in school, so if you are a student, you should consider applying for student credit cards.

How Your Credit Report Works

You get that three-digit credit score based on five factors of how you deal with credit: payment history, amounts owed, length of credit history, new credit and types of credit used. Lenders use this number to determine your student credit card eligibility.

• Payment history, which refers to whether you paid your bills on time, counts for 35 percent of your score.

• Amounts owed refers to how much of your available credit you use. Ideally, you would use less than 30 percent of your available credit. Otherwise, lenders might worry that you are overextended.

• Length of credit history is where getting a card as a student can really boost your credit score: the longer you have a credit history, the better. That accounts for 15 percent of your score.

• Both new credit and types of credit used count for 10 percent of your score. The first refers to how much new credit you apply for at once. It’s not good to apply for a lot at once. Lenders also like to see a variety of credit, such as installment loans, credit cards and a mortgage, for example.

Spend Small to Build Credit

The best way to use a brand-new credit card is to start small. Use your card only for purchases that you know you can pay off at the end of the month. You might want to buy only gas with it, or you might just want to use it for a small purchase at the grocery store. Showing that you use your card responsibly will raise your credit score.But don’t max out the card to go on a ski trip, for example. For one, maxing out your card lowers your credit score. And for another, if you can’t pay off the ski trip at the end of the month, you’ll have to pay interest on a trip long after you’ve skied down that last run. And if you are late with a payment, or if you find that you can’t pay for the trip, you will have damaged your credit score. Bad credit is worse than no credit.

Your financial future can start while you are still in school. You can be ahead of the game when you graduate if you use a student credit card responsibly.