Establishing Credit in College

Confused about how to build up good credit? Join the crowd. Handling money and credit cards is an important lesson to learn and mistakes can be costly. Designer clothes, the perfect pair of sunglasses and trips to your favorite restaurants can add up quickly. All too often young adults do not stop to consider the future and find themselves in a financial bind. Here are a few things you should know about building a good credit history.

It is very important to establish a line of credit. A reliable way to establish credit is to get a credit card. Since many high school graduates cannot qualify for most cards, as they have no credit history, applying for a student card from a major credit card company or a bank is probably the simplest way to obtain that first credit card. Some cards may require a co-signer, so you may consider asking your mom or dad for help.

Most likely, your first credit card will have a low credit limit and a high interest rate, and may have an annual fee. This is not necessarily a bad thing, as it will allow you to get by in style, but prevents you from buying up half of the mall in a single impulsive shopping trip. While it may be tempting to buy that designer pair of sunglasses or take all your friends to an extravagant dinner, be cautious about how often you use your credit card, as you do not want to be faced with a bill you cannot pay. Be aware that if the balance is not paid off in full each month, an interest fee may be charged. Interest fees can add up quickly, and before you know it, you could be in credit card debt. To avoid debt, try to pay off the entire balance each month, rather than just the minimum payment. It is also best to read all of the disclosures regarding fees and interest rates before you sign on the dotted line.

After using a credit card, you will begin to establish a credit score. A credit score is what determines your ability to buy larger things later in life, such as a car or a house. A credit score may also be used by employers, rental agencies, and banks as a factor in determining your financial responsibility. To determine your credit score, a credit report must be requested from one of the major reporting agencies. The three major credit reporting agencies, Equifax, TransUnion, and Experian, are required to give you one free report each year. It is wise to get a yearly credit report to be certain there are no discrepancies or fraudulent charges.

If you keep these tips in mind, you will be well on your way to building up an excellent credit history. Working on your credit now will go a long way to helping you later in life.



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