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Let’s dive into best practices and tools that can help you set yourself up for financial success.
A strong credit score can mean lower interest rates on student loans, better credit card offers, and even increased eligibility for housing and scholarships. But how do you build credit responsibly while still in school? Let’s dive into best practices and tools that can help you set yourself up for financial success.
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Establishing credit early and managing it wisely can set you up for financial success. Here are some ways to build credit safely:
Many banks offer student credit cards with lower limits and rewards for responsible use. These cards often come with perks like cashback on everyday purchases, which can be helpful in managing your expenses. Look into options such as the Discover It Student Cash Back or the Chase Freedom Student Card. These cards are designed to help you build credit while offering competitive rewards.
Your payment history accounts for 35% of your credit score. Late payments can significantly damage your score, so it’s crucial to make payments on time. Set up auto-payments for bills and credit cards to ensure you never miss a due date. You can also use tools like Mint or your bank’s mobile app to track due dates and set reminders.
Credit utilization is the percentage of your available credit that you’re using. Aim to use less than 30% of your credit limit to maintain a healthy credit score. For example, if your credit limit is $1,000, try to keep your balance under $300. Keeping utilization low shows lenders that you can manage your credit responsibly.
If a parent or guardian has good credit, being added as an authorized user on their account can help you build credit history. This is one of the easiest ways to jump-start your credit without taking on additional debt. The account holder’s good credit behavior (like on-time payments) will reflect positively on your credit report.
Some credit unions and online banks offer small credit-builder loans that allow you to make monthly payments toward a lump sum of money, which is held in a savings account until the loan is repaid. These loans help you build credit while saving money. Look into options from your local bank or credit union, or explore platforms like Self to find loans designed to build credit.
A high credit score can translate into real financial benefits while you're in school. Here’s how:
If you need private student loans, a good credit score can qualify you for lower interest rates, saving you hundreds or even thousands over the life of the loan. For example, lenders like Sallie Mae or Earnest offer competitive interest rates for borrowers with good credit. Even a small difference in your interest rate can add up to significant savings in the long term.
Many landlords check credit scores before approving tenants. A strong score can help you secure better housing without needing a cosigner, which can be a major advantage. With a solid credit history, you may be able to rent an apartment on your own, with no added stress of finding a cosigner.
Some car and renters’ insurance companies offer lower premiums to those with good credit. In fact, your credit score can play a role in determining how much you pay for car insurance, with higher scores often resulting in lower rates. You can find affordable insurance by shopping around with providers like GEICO or State Farm.
With good credit, you may qualify for student credit cards with better perks, such as cashback on school supplies or travel rewards for study abroad programs. For example, the Chase Freedom Student Card offers rewards for every purchase, while Discover It Student Cash Back provides 5% cashback in rotating categories. These rewards can add up and help cover everyday college expenses.
There are several digital tools available to help college students build and manage their credit effectively:
Credit Karma provides free credit score tracking, credit report monitoring, and tips to improve your credit. It’s a great resource to monitor your credit status and get personalized recommendations for improving your score.
Mint is an app that helps you manage budgets, track spending, and monitor credit health. You can link your bank accounts, credit cards, and bills to see your financial situation in one place, making it easy to stay on top of your spending.
Experian Boost allows users to improve their credit score by including bill payments like utilities, streaming services, and phone bills in their credit report. It’s an easy way to boost your credit without taking on any new debt.
Chime Credit Builder is a no-fee secured credit card that helps users build credit by reporting on-time payments to credit bureaus. It’s a great tool for students who are just starting out with credit.
A smart credit strategy can make a huge difference in managing college expenses and setting yourself up for financial success. By using credit responsibly, making timely payments, and leveraging financial tools, you can build a strong credit profile that leads to lower borrowing costs, better financial opportunities, and overall peace of mind.
Want to learn more about financial planning for college? Check out our student portal for expert advice, scholarship listings, and tools to help you make college more affordable!
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