Building Credit as a College Student

The best ways for college students to build credit are by becoming an authorized user and opening up a secured credit card.

Becoming an Authorized User

If you are a college student looking to build credit the first thing you will want to do is open a credit card as an authorized that has a long-established line of good payment history and good utilization rate (30% of credit score). The longer the line of demonstrated good payment history (35% of credit score and length of credit history is 15% of credit score) and the higher the credit limit the better the impact will be. The earlier you start this process the better (ideally before college). This is like a cheat code to helping boost your credit in the short term, especially if you have little to no credit.

The common way students build credit quickly is by piggybacking off their parents and becoming an authorized user on one of their accounts. When they piggyback off their parents’ good credit they are can quickly bypass a lot of unnecessary credit building hoops and form a good base. That base can be built upon much easier later.

Opening Up a Secured Credit Card

College students are very unlikely to have a good mix of credit or a diverse credit portfolio. Due to this, they should open a secured credit card which will have the benefit of diversifying their credit portfolio and increasing their “types of credit” (this accounts for 10% of credit score). Moreover, secured credit cards are a good way for them to practice responsible spending on a smaller scale and they will be much more mindful of the credit building process when they see it in their wallet. Since secured cards have a small limit they can also help enforce good budgeting habits for college students in the long term.

Credit Builder Loan

If you so choose you can also go the route of a credit builder loan in order to boost your credit in the long term. This option is a lot less popular than becoming an authorized user or opening up a secured credit card but it’s still an available option nonetheless and something to consider. With a credit builder loan, the idea is very similar to secured credit card except that you are instead making small payments on a secured loan as opposed to a secured credit card. The idea is the same but the vehicle for repayment and type of credit is a little different.

Undecided About Your Options?

You can go with all three if you’re really adamant about having amazing credit but typically getting a secured card and becoming an authorized user will suffice. College can be very expensive so make sure to watch your spending habits and see what option best works with your spending habits. Otherwise, as long as you have some established lines of credit your score will begin to naturally develop and build overtime as you maintain good payment history. As long as you don’t make too many mistakes the rest should take care of itself.