The average college student graduates with around $30,000 in student loan debt. While this isn't an insurmountable amount of debt for a degree that may boost your earning potential, it also makes it important to maintain responsible credit habits in college and beyond.1 Below, we discuss four key facts college students should know about their credit.
You Don't Need to Avoid Credit Cards...
Some college students tend to avoid credit cards for fear of falling into the debt trap. However, using credit cards responsibly may boost your credit score and allow you to build a solid credit history before you enter the working world. Because the average age of your credit history may have a significant impact on your credit score (with the newer your history, the lower your score), getting a credit card when you're 18 or 19 may help you attain a higher credit score in your mid-twenties than you'd have if you don't get your first credit card until after you graduate.
...But You Should Use Your Cards Responsibly
Some important tips to note:
- Don't charge more than you can afford to pay off. Otherwise, you could end up paying high interest charges on your purchases.
- Don't miss payments or make late payments. Doing either may significantly impact your credit score, offsetting any benefit of having a credit card.
- Once you've built a credit history, investigate cards that offer rewards. Although few teens typically qualify for cashback credit cards immediately, building up your credit may allow you to qualify for cards that offer generous rebates and rewards.
Being an Authorized User Can Also Build Credit
If you aren't ready for a credit card of your own yet but would still like to build your credit history, you may want to consider asking one of your parents or guardians to add you as an authorized user on their credit card. This may allow you to make purchases with the card and take advantage of the same credit-boosting benefits available to the cardholder. (This is only a good option if the cardholder has good credit, however, if the cardholder regularly misses payments on the card on which you're an authorized user, your credit may suffer as a result.) Not all credit cards allow this. Sometimes, opening an account with a parent separate from their existing cards may help you establish credit, though.
Check Your Credit Reports Regularly
There are a number of free services that allow you to check your credit score or monitor credit alerts. Additionally, every adult is entitled to a free copy of their credit report from all three major reporting bureaus once per year.2 By keeping an eye on your credit, you may be able to quickly correct any errors or spot missed payments that could put your score in jeopardy.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess
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2 https://www.annualcreditreport.com/index.action