If you are a college student or are otherwise just starting to build your credit score, you won’t have much credit history which shows your debt-paying habits. While you may not need a credit score in college, as soon as you apply for a credit card, buy a car or apply for a loan, you’ll want a clean credit history and good score to get approved and secure the best interest rates. It’s never too soon to learn how to manage your finances and build your credit.
Here are a few guidelines to ensure a strong start to your financial history:
Apply for a credit card with a low limit. Without a credit history, you may have some trouble convincing a creditor to trust you. You may have more luck with a credit card from your bank or a secured credit card. Charge small amounts every month and pay off your balance at the end of each billing cycle. Showing lenders that you can handle even a small amount of credit will help prove that you can manage larger loans.
Make your payments on time, every time. Whether it’s rent, student loans, car payments or your credit card payments, do not pay late. You will have to pay late fees and penalties, your interest rate may go up and your credit score will take a hit, proving you are not handling your finances well.
Pay off as much of your balance as possible. For beginning borrowers, it can be tempting to go out and charge up to your limit. Don’t make the purchase if you can’t afford to pay it off. You need to at least make the minimum payments every month but try to make the payment in full if you can. By paying off as much of your balance as you can every month — if not the entire balance — you will avoid paying a lot of money in interest.
Check your credit report. You can get your credit report from each of the credit reporting bureaus once a year at annualcreditreport.com. For a small fee, you can also see your credit score.
If you’re just starting on the path to managing your finances, start cautiously. It’s easier to implement good habits from the beginning than it is to dig yourself out of debt.