Top 5 Reasons You Need to Build Credit When You're Still in College

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Whether you're just starting college or are about to graduate, one thing is certain – credit will become an important part of your life as you transition into adulthood. Many young adults don't think too much about the importance of credit until they're ready to make a large purchase, such as a car or a home. But credit plays a role in many aspects of your life, from getting a cell phone plan to renting an apartment. Understanding and mastering credit early can help you reach your financial goals and enjoy a higher quality of life.

Why you should care about credit when you're young

If you're like most college students, you probably don't have much credit history. The key is to start building credit now so that when you graduate, you'll have a solid foundation on which to build your financial future. The responsible use of credit can be the gateway to financial freedom when used responsibly.

Reasons building credit early helps you

Establishing and building credit early has numerous advantages. For young adults just starting out, credit can be used as a financial tool to help make the transition into adulthood a little smoother. The following are the top 5 reasons you should start building credit while you're still in college.

Finding a place to live

One of the most important things credit is used for is to help young adults find a place to live. Landlords and property managers will often check your credit score as part of their screening process when you apply for an apartment. A good credit score will give you a better chance of being approved for the apartment you want.

Buying or leasing a car

In addition to finding a place to live, credit is also important for buying or leasing a car. When you're ready to get your first car, the dealership will likely check your credit score to determine if you're eligible for financing. A good credit score can help you get approved for a loan with a lower interest rate, which can save you money over the life of the loan.

Setting up utilities

When you move into a new place, you'll need to set up utilities like electricity, water, and gas. Most utility companies will check your credit score as part of their creditworthiness criteria. A good credit score can help you get approved for service and may even help you qualify for lower rates. With poor or no credit, you'll often need to provide a higher deposit to set up service as well.

Finding a job

Employers often check credit scores as part of their background screening process. This is especially true for roles that involve handling money or sensitive information. A good credit score can give you a leg up in the job-hunting process and help you get the job you want. Securing favorable interest rates on credit cards and loans

One of the most important benefits of having good credit is that it can help you get approved for credit cards and loans with favorable interest rates. This can save you a lot of money over time. 

Steps to take to build credit early

Now that you know why credit is important, you're probably wondering how you can start building credit. The following are a few steps you can take to start building credit while you're still in college:

Get a student credit card

One of the best ways to start building credit is to get a student credit card. Student credit cards are designed for people with little or no credit history. They typically have lower credit limits and higher interest rates than regular credit cards. But if you use them responsibly, they can be a great way to start building credit.

Get a secured credit card

Another option for building credit is to get a secured credit card. Secured credit cards require a deposit, which is used as collateral in case you default on your payments. Like student credit cards, secured credit cards often have higher interest rates and lower credit limits. But if you use them appropriately, they can be a useful tool for building your credit over time.

Become an authorized user

If you can't get a student credit card, another option is to become an authorized user on someone else's credit card. This means that you'll be able to use their credit card, but the account holder will be responsible for the bill. Just make sure that the person you're becoming an authorized user for has good credit and is responsible with their own credit card use.

Handling credit responsibly

Make on-time payments

One of the most important things you can do to build credit is to pay your bills on time. This includes credit cards, student loans, car payments, and rent. Payment history is one of the most important factors in credit scores. So, by making your payments on time, you'll be well on your way to building a good credit score.

Keep credit utilization low

Another important factor in credit scores is credit utilization, which is the amount of credit you're using compared to your credit limit. It's a good idea to keep your credit utilization below 30%. This means that if you have a credit card with a $1,000 limit, you should only charge $300 or less to it each month.

Check your credit report once per year

It's a good idea to check your credit report at least once per year to make sure there are no errors. You're entitled to one free credit report from each of the three credit reporting agencies every year.

Developing good financial habits while you're young will benefit you for years to come. Unfortunately, many young adults have not had the education or guidance needed to make sound financial decisions and end up mishandling their finances, which can lead to years of financial hardship. One key component of financial success is credit and credit management. It's important to understand how credit works and how it can impact your life. Armed with this knowledge, you can make smart decisions that will benefit you now and into the future. By following the steps outlined above, you'll be on your way to a bright financial future.

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