A good Credit Score is a key factor for a lot of important things in life. It will come into play when you apply for a car loan, a mortgage and credit cards. However, a good credit score may also be a factor in ways that you haven’t thought of.

One of the most exciting parts of growing up is becoming financially independent, but learning how to do so can be challenging. Building good credit is a must: It will help you qualify for loans, auto insurance, rental applications, cell phone plans and can even impact job prospects.

The following are the 7 ways Students can build Good Credit:

1. Pay off your balance each month

When you seek to build a good credit, you need to do your best to ensure you do not carry forward any balance of the current month to next month.

Firstly, you should avoid using a credit card while you are a student but should there be a situation that you get a credit card, you should use it only or the purchases that are within your affordable limits.

A credit card has a concept of total due and minimum amount due. Always pay the full amount due because if you pay the minimum amount due, you will be charged substantial interest on the balance amount that is likely to bring down your credit score.

While part-timing is more prevalent in the west, in India, you can always have some freelancing arrangement that provides you a monthly income to pay bills.

2. Start Saving. Start Investing

Early to bed, early to rise; makes a man, healthy, wealthy and wise.
A similar thought process should be applied when it comes to financial well being. As a student, you may not have a fixed source of income. Also, it is a time when you would naturally want to enjoy. But, amidst all this, you should develop a habit of saving Rs. 500 per month minimum and invest in mutual funds.

3. Open up your own Credit Card

If you can provide proof of income, it may be time to apply for a card in your name. But know that things have changed from the days when every college freshman’s dorm mailbox overflowed with credit card offers and card issuers rained free pizza and T-shirts on students who applied.

In this post-Credit CARD Act era, most issuers are no longer clamoring to put a credit card in the hands of every college student. Some no longer offer student cards; others switched to pushing debit cards on campus. Also know that when you receive a credit card that’s all yours – one with no co-signers – the responsibility for handling the card wisely and repaying your debts falls squarely on your shoulders.

4. Become an Authorized User

Having a parent or guardian add you as an authorized user on their credit card can be a great way to start building your own credit. As an authorized user, you’ll have the benefit of your own credit card and access to the primary cardholder’s credit limit. However, you won’t have any legal responsibility to pay off the debt on the credit card. In fact, you don’t actually have to use the card at all to reap the benefits of activity on the account towards your credit score.

If you are looking into this option, make sure the credit issuer reports authorized users to credit bureaus as this is not always the case. If authorized users aren’t reported, you won’t see any effect on your credit report.

5. Maintain a solid payment history

Keeping up with your credit card payments is the most important factor in building your credit score. Payment history makes up 35 percent of your credit score calculation and is a sign that you know how to use credit responsibly. Using credit responsibly really comes down to making purchases that you can pay off. While it may be tempting to use your credit card to buy big-ticket items that could easily lead to a bill that you don’t have the resources to pay. It also takes away from your available credit that you may need for something else.

Instead of making large purchases, use your credit card to make small purchases that you know you will be able to pay off. If you want to use your credit card to buy a higher-priced item, come up with a plan for how you will repay the charges before you make your purchase. Missing a payment, making a late payment or even making less than the minimum payment on your bill is all reported as missed payments to credit bureaus. This will put a dent in the credit score you are trying to build and could leave a mark on your credit report for up to seven years.

6. Avoid Big-Ticket buys, except in Case of Emergency

A credit card is a valuable financial tool. However, students must be able to manage their credit card responsibly to benefit from using the tool. 

 Keeping your debt levels low will ensure that if there is an emergency, you’ll still have plenty of your credit line accessible. So, if your tire blows out or your cell phone falls in the toilet, you can purchase a replacement without exceeding your credit limit.

7. Check your Credit Report

When trying to build up a credit score, it’s important to track your progress. One way you can do this is by requesting a credit report. You’re entitled to a free credit report from one of the three reporting bureaus (Experian, TransUnion, Equifax) once a year, and in light of the recent coronavirus pandemic, credit bureaus are offering free weekly credit reports through April 2021.

Checking your credit report will allow you to track your credit score and activity on your accounts. You’ll also get a breakdown of how you are doing with the major credit score factors which can help you continue to build your score.

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