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Starting a new semester? Why you should start building credit in college

By Abigail Mason, LendEDU

The start of a new semester. It’s that time of the year when you purchase new textbooks, scope out new professors to get an idea of what you can expect from upcoming classes and mark another semester off your calendar. It could also be the right time to begin building credit.

Unfortunately, many college students either have bad credit or no established credit in their own name. While this might not seem like too much of a problem when you are in college, especially if your parents are still funding most of your expenses, once you graduate, it could prove to be a huge issue.

Bad credit or lack of credit prevent you from being able to rent an apartment, buy a car or obtain insurance on your own. Even worse, once you realize the impact that bad credit or lack of credit can have on your life, it’s not a problem that can be fixed overnight. This means you might spend several months or longer trying to resolve a problem that is having a very real impact.

The best way to thwart this issue is to be proactive and begin building your credit while you are still in college. Below, we present several steps you can take to build your credit.

1. Ask your parents if you can become an authorized user on their account. With this strategy, your parents still have the ability to monitor your spending to help keep you in check, but you benefit by being able to build good credit using a practice known as piggybacking. If your parents have good credit, your credit will receive a boost.

2. Apply for a student credit card and use it for small purchases. One of the best ways to build your credit is with on-time payments and responsible use. By obtaining a credit card in your own name, you will be able to start a credit history that will appear on your credit report.

The key to making this strategy work is to keep purchases small so that you will not have any trouble repaying your charges at the end of the month. Keep it to one account and make certain you do not have any late payments.

3. Pay all bills on time. It’s not just credit cards that affect your credit. Other types of payments are also reported to the credit reporting bureaus and can impact your credit. This includes your utilities and rent. Whether it’s a traffic fine, rent or something as incidental as a library fee, make sure you always pay all bills on time.

4. Never apply for several credit cards at the same time. Did you know that every time you apply for a new line of credit, an inquiry is made into your credit, and those inquiries can drag your score down by a few points? Applying for too much credit over a short time period can cause your credit score to fall. For most college students, one credit card is enough.

5. Use student loans only for educational expenses. Far too often, many college students fall into the trap of using student loans to pay for everything from their daily java habit to Friday night pizza and fun getaways. Over time, that sort of habit can cost you. When used correctly, student loans can help to fund your education while also helping you to build credit. Make a point of borrowing only what you need to attend school to keep balances low.

If possible, try to begin making payments on your student loans while you are still in school, even if it is only making payments toward the interest. There will come a day when you have graduated when you will need to begin repaying your student loans. By chipping away at it while you are still in school, you can help to ease the pain of inevitable repayment.

Just because you are in college does not mean that you cannot begin working toward building a solid credit score that will benefit your future.

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