Increase Your Credit Score While in School
While your top priority is scoring well on exams, there is no reason you can’t kill two birds with one stone and enhance your credit score at the same time. With a little knowledge and know how you can make it happen.
How to build credit while in school
- Auto debit: Instead of paying for your books in cash charge them on your credit card and setup a reoccurring auto debit for several months until the books are paid in full. It may cost you an additional $15-$25 in interest over that time but you will be saving yourself money in the long run.
- Don’t sign up: You may see several credit card companies on campus this fall chasing you down with a free t-shirt to sign up for their card, and though it may help you put off laundry one more day, don’t do it. Multiple queries into your credit are not favorable. In fact, they can actually decrease your credit score.
- Low balance: Keep your balance relatively low in relation to your total credit line. By keeping a favorable debt to credit line ratio you will score valuable points.
- Keep one card: Don’t bounce from card to card or stockpile multiple cards. Keeping one card for an extended period of time holds significantly more value than hoping around.
- General purchases: Credit cards are great for everyday purchases like groceries and gas, provided you can pay them off at months end. Again, it’s all about getting on the grid and displaying a positive credit history.
Check out the BEST credit cards for students »
When is your credit score most commonly viewed
- When applying for a credit card
- When leasing an apartment or buying a house
- When purchasing a car
- When taking out any type of loan (personal, equity, etc)
- When applying for employment for many professions
Can a prepaid card help me build credit?
No. You need to have an actual credit line extended to you to strengthen your credit score. You don’t actually borrow money with a debit card. Building good credit is all about borrowing money and making on time payments. As you establish a positive credit history your credit score will rise and your interest rate will drop. That said, debit cards are a good way to get your feet wet.
Debit cards work the same as a credit card in the sense that you can make purchases online, over the phone, and in stores. You can also take cash withdrawals from ATM’s. If your parents are steadfast against you having a credit card you may want to suggest a prepaid card to prove to them how responsible you are before graduating to a credit card.
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I really want independence and without a good credit score that simply won’t be possible. Thanks so much for the tips, they will really come in handy in the next few months when I’ll be on my own. =)