How to start building credit in college

The college years are a time to build knowledge and experience. And under normal circumstances, just balancing those two goals can feel like a lot to handle. So it might seem like a stretch to add “building credit” to your college to-do list. 

But if you can start to build credit as a college student, it’s probably worth it. Companies can use your credit to decide whether to offer you a car loan, an apartment, a mortgage and sometimes even a job. And building credit while you’re in school means you won’t be starting from scratch when you graduate. Here are a few ways to start building credit in college.

Building good financial habits can help prepare you to build credit. Especially since certain habits, like spending responsibly and paying bills on time, are key factors in building good credit.

Looking for a first step? Consider setting up a budget. Doing so can help you get a clear picture of how much you’re able to spend each month and where your money’s going. The U.S. Department of Education has advice on how students can create a budget. 

Just be aware that sticking with your college budget is just as important as making one. And that learning to manage your money is a useful skill, no matter what. Plus, it can also help prepare you for the responsibility of having a credit card.

Explore whether a credit card is right for you

The Federal Trade Commission says the best way to start building credit is with a credit card. But that doesn’t necessarily mean it’s the right choice for everyone. Credit can be built with a credit card when you use it responsibly. That means doing things like making monthly payments on time.

But there are other factors to consider, too. For example, using a credit card irresponsibly could have long-term negative consequences for your credit. And that could end up affecting other parts of your life.

You should also make sure you understand how credit card interest works. If you don’t have an established credit history, your first card may come with a higher interest rate. But you may be able to avoid paying interest if you budget and pay off your entire balance in full each and every month. Paying off your balance on time is also one way to build your credit—as you’ll learn below.

Ask about being an authorized user

If you think you’re ready for a credit card but don’t qualify for one on your own, you could see whether a loved one is willing to make you an authorized user on their account. If you’re both using the card responsibly and the card issuer is reporting this to credit bureaus, you could start building your credit history. It could also give you experience using a credit card.

Just make sure you and the primary cardholder agree on what you expect of each other. And keep in mind that negative actions, like late or missed payments, could still hurt your credit. Ask your card issuer for more details about how the company handles credit reporting for authorized users.

And if you don't think you’re ready for a credit card, there are other methods to establish credit, too.

It’s not simply having a credit card that helps you build credit—it’s what you do with it. 

If you use your card responsibly, you can start building good credit over time. Here are four ways the Consumer Federal Protection Bureau (CFPB) suggests you can do that:

• Use only the credit you need. Your credit score may suffer if you apply for or open a lot of accounts in a short space of time.
• Pay on or before the due date. If you pay even one day late, it could mean late fees and interest charges. Late payments could also hurt your credit score. To help yourself pay on time, you could set up automatic payments or electronic reminders.
• Try not to carry a balance. Paying off your balance each month will help you avoid paying interest. You could use your credit card on a fixed expense, like a cellphone bill. That way, you can keep your monthly payment manageable. And you can budget knowing about how much it will be.
• Keep an eye on your credit utilization ratio. This is the percentage you use of your total credit limit—across all your accounts. If you use too much, that can hurt your credit score. Experts say not to use more than 30% of your available credit.

As you use a credit card responsibly, you can start to build a positive credit history. That goes into your credit report, which then is used to calculate your credit scores. And your credit score will come into play down the road if you apply for things like car loans, mortgages or additional credit. You can learn more about credit reporting and credit scoring from the CFPB.

Good credit scores for college students

So what’s a good credit score for a college student? There really isn’t one. A lot of factors determine what’s considered a good score.

The age of your accounts is one factor that can impact your score. And that’s one reason getting a head start in college can be helpful later in life.

If you have student loans, they can also help you establish and build your credit history. That’s because the amount you borrow for student loans, as well as your repayment history, will show up on your credit report. 

Many federal student loans don’t need to be repaid until at least six months after college. But there are benefits to making even small, regular payments while in college: Doing so can help establish payment history and reduce the overall cost of a loan.

Here are some more tips on paying off student loans.

Whether you’re trying to lease your dream apartment or get a loan for a new car, establishing good credit can help you reach your goals. And if you can start building credit as a student, you’ll be in a better position to take your next steps by the time you leave school. 

If you decide you’re ready for a credit card, a student credit card from Capital One could be a good pick. It allows you to build credit with responsible use while you’re in school—and earn rewards while you do it.

Once you’ve started to build credit, you can consider monitoring your progress and learning ways to keep improving your credit score. Here’s to the beginning of your credit journey.