How to Start Building Credit as a College Student

The terms “credit” and “finances” can be confusing and daunting. Although building credit right now may seem insignificant, your future self will thank you.

On Feb. 9, Career Development and the Finance Club presented a workshop called “Let’s Talk Credit”, which featured Heather Vincent, Vice President, Campus Program Manager at Wells Fargo. This presentation provided some helpful tips and practical strategies for building one’s credit and maintaining it.

The first thing you will want to do is choose a bank you feel comfortable with when starting your credit journey; this decision is up to you. However, it is a good idea to also ask your parents, or a trusted adult, about how they started. It may be even a good idea to have your parents add you as an authorized user on their credit card. This method allows you to have your own credit and have access to the primary cardholder’s credit limit without having any legal responsibility to pay off the debt on the credit card.

Xiao Li, a sophomore chemistry student, started building her credit with this method. Li said, “My father put me on his card as an authorized user to practice at a young age. Now I have my own and try not to spend over 25 percent of my credit limit.” Li added that she also has a checking account that is specifically used to help pay off her credit card.

Another thing to keep in mind is your credit limit. Your credit limit is the maximum amount of money you can spend within a given month. Although it may be tempting to use up your card to the max, it is recommended to keep your credit use below 30 percent.

Although having a credit card will only benefit you in the long-run, there are some things to keep in mind. It is important to spend responsibly, maintain a solid payment history, and to not apply for too many credit cards at once.

Jeffrey Mass, Director for Employer Engagement, echoed that it’s important to only purchase items you can afford. He said, “Credit scores are based on consistent account activity, not high numbers. Make small purchases that you can pay off each month.”

When discussing credit, there are five things to keep in mind, better known as the 5 C’s: credit history, capacity, collateral, capital, and conditions. To put it into short terms, track what you spend, manage your payments, investments, or savings in case of a drawback, and the economic environment and how you plan to build your credit.

Another important aspect of one’s credit journey is having a good credit score. This number is key to obtaining important things in life such as applying for a car loan, a mortgage and other credit cards.
Typically, credit scores range from 300 to 850, and a score above 700 is considered good. The way to build up this score is by using your credit card a little bit every month, but keep in mind that this is a gradual process that takes time.

Li recommended that students pay their bills on time so their credit score does not drop significantly, because it can be a challenge to build it up when it goes down.

Another aspect of building credit is to save as much as you can in order to be able to pay off those monthly credit bills. Angelica Alayon, a sophomore business student, said, “It is essential to start saving. It doesn’t have to be massive amounts, because over time, it makes a difference.” Li added that it’s better to start somewhere, or else you run the risk of ending with nothing.

While trying to build your credit score, it’s also important to track your progress. One way to do this is by requesting a credit report. Everyone is entitled to a free report from one of the three reporting bureaus (Experian, TransUnion, Equifax) once a year. Doing this can help you keep track of your score and activity on your accounts.

While college students may not typically be concerned about their credit score, building credit early on can help you achieve your financial goals before and after graduation.