How To Build Your Credit Score In College Without a Credit Card
The sky is the limit for many college students. College is an opportunity to improve your circumstances and choose a vocation that will provide the means to live a happy, healthy life. Many students attending college are at a transitional period in their lives, moving from dependence to independence. They’re making choices that will affect the rest of their lives: vocationally, socially, and financially.
College is an important time to prepare kids for the “real world.” After college, many people discover that the job market is extremely competitive, housing prices are sky rocketing, and creditors are strict about who they’ll lend money to. In fact, the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 prohibits people under 21 from getting a credit card, unless they’re able to show they have a reliable source of income.
So, how are you supposed to build your credit score and prepare for life after college if you can’t use a credit card? Statistics show that millennials (currently college students or recently graduated) aren’t using credit cards like previous generations. More than 6 in 10 people ages 18 to 29 don’t have a credit card, according to a Bankrate.com survey.
Whether you don’t have a credit card due to choice or you’ve been denied because you have little to no credit history, there are still ways to build your credit score during college. Here are a few options you should consider:
Student Loans: More students are opting for student loans than ever before. With more than 44 million borrowers, Americans owe over $1.45 trillion in student loan debt. The average student graduates with $37,172 in student loan debt, according to a recent study.
However, student loans don’t have to be scary. Student loans provide the means to obtain a higher education for those who can’t afford to pay for it right now. Student loans also provide a great way to build credit scores without using credit cards. Just be smart with your loan. Don’t borrow more than is necessary and don’t miss any payments.
Bank Loan: If you own a debit card and are responsible with it, your bank might be more inclined to help you get a loan even if you don’t have much credit history. You could use some money in your savings as a certificate of deposit and apply it as collateral for the loan. Taking out a small bank loan and paying it off in a reasonable time will help you build your credit score and create a healthy relationship with your bank.
This, in turn, will help you when you want to get a credit card. By showing your bank that you can pay back a loan, the bank will be more likely to approve your credit card request. Obtaining a credit card from a bank that you’ve created a strong history with will be much easier than getting a credit card from a creditor who knows nothing about you.
Regular Bills: When you’re a college student, your largest expense is often your educational fees. After that, it’s usually your rent payment. With rent payments averaging between $500 to $1,000 per month in college, it could really boost your credit score to report rent payments to the credit bureaus. RentPlus automatically back reports all previous months of rent payments (up to 24 months) to the major credit bureaus. So, if you’ve been renting for a year and you sign up with RentPlus, you would get 12 months of back reporting along with your monthly payments from here on out.
With your credit history affecting 35% of your credit score, reporting your rent to credit bureaus can help you create a strong credit history. Contact your property manager today to find out how you can start build your credit score through your rent payments.
Educate Yourself: While you may not be able to get a credit card now, one of the best ways you can help your credit score in the long run is to learn how take care of your finances. Learn how to use a credit card. Start a budget. And take control of your money now so that it doesn’t take control of you. According to a recent survey, 44% of college students “weren’t educated by their parents or teachers on important topics related to credit usage and management before getting a credit card.”
As a young college student, now is the time to take control of your finances. Build your credit score and create financial stability. Make the right choices now so that you can enjoy more financial success in the long run.