Fundamentals of Building and Maintaining Good Credit
should I build credit? Why do I need credit? Most college students leave college
without building any substantial credit history. When you are ready to get a car
loan, a house loan, or make any other large purchase you will find yourself
faced with high interest rates – and that is if you are lucky. You will likely
be turned down with out a cosigner with a solid credit history.
College students can build credit and sound financial habits in several ways and
two of the easiest are paying bills for small subscriptions and buy using a
credit card. For example, college students should put their cell phone or
magazine subscriptions in their name rather than their parents’ name and pay
bills on time, every time. It is also a good idea to apply for a credit card and
learn to use that credit card responsibly. When you fill out a credit card
application you are taking the first step to building credit, but simply having
a credit card will not necessarily improve your credit rating.
earn a solid credit score as a college student you need to show signs of
responsible spending habits. If you choose a credit card with a low credit limit
and pay your monthly bills on time you will begin to improve your credit score.
This cannot be stressed enough: pay your credit card bills on time. This
is the single most important sign of good credit and the more often you do it,
the more credit you build. On the same token, every payment you miss or are late
on results in a mark on your credit report which all lenders have access
to and use to determine whether you are credit worthy and at what rates of
interest to loan you money.
As a college student trying to build credit, you should also keep
a low balance on your credit card. Running up the credit card bill every month
is a sign of poor spending habits and suggests you are at risk for default on
your loan. The best ways to ensure you are following responsible spending
patterns are by spending within your income and by planning so that you are able
to pay your monthly balance even in the case of emergency. Try to keep your
percentage of purchases on a credit card under 25% of your monthly income. One
more time for effect: Pay your credit card bills on
really is that simple to begin building credit. Is there any other way than
applying for a credit card? Not really. You have to show your ability to pay
credit to earn the right to credit. Down the line when you are looking for an
auto loan or home loan you will be glad you filled out that first credit card
application at CollegePlastic.com!