How to Build Credit: 7 Ways to Build Credit as a College Student

Posted on Feb 23rd, 2021

Jump ahead:
What Is Credit?
Why Do You Need Good Credit?
What Impacts a Credit Score?
How to Build Your Credit Score While in College


As a college student, you are likely starting to think about your future and ways to streamline the transition into adulthood. In addition to considering future careers, one thing to think about during your college years is establishing credit and starting to build a credit history.

After you graduate, having a good credit history can help you as you search for jobs and begin to apply for loans. Learn more about what you can do to establish your credit, what factors affect your credit history and why having credit matters. Read on to learn more about how to build credit as a college student.

What Is Credit?

Credit has several meanings. When people talk about credit, sometimes they are referencing the money that a bank or another type of lender gives an individual with the understanding they will repay the amount, plus interest.

Other times, credit refers to a person’s history of having and repaying loans. In this case, credit encompasses:

  • How many loans and credit cards a person has.
  • How much money they have borrowed.
  • Whether they have a history of making payments on time.
  • Whether their payments were made in accordance with the terms of their loan or credit card.

You start to build credit when you take out your first loan or apply for your first credit card. After you open your account, the lender or bank reports information about your loan and payment history to the credit reporting agencies. In the U.S., there are three credit report agencies: TransUnion, Experian and Equifax. Each agency collects information individually, which means some of your credit information may differ between the agency reports.

The information that is likely to be found on your credit report includes:

  • Your current and previous addresses
  • Your Social Security number
  • Your current debts and credit accounts
  • Your payment history
  • Public records about you, such as whether you have been sued or have filed for bankruptcy
  • Names of companies or lenders who have recently made inquiries or looked at your credit report

You have the right to check and review your credit to verify the information is accurate and error-free. You can review your report from each of the three agencies without charge, once per year at AnnualCreditReport. Others who might review your credit include lenders, potential employers and potential landlords.

Why Do You Need Good Credit?

Your credit history can reveal much about you to a potential lender, landlord or employer. Your credit can affect the following areas of your life:

  • Your ability to rent an apartment: When you apply to rent an apartment, your future landlord will most likely ask for permission to check your credit. By reviewing your credit history, a landlord can see if you have previously missed payments or if you have a history of paying late. If you have negative items on your credit report, your rental application can be denied. Having a strong credit report can improve your application, which can be particularly helpful in a competitive rental market.
  • Your ability to get a job: Some employers check the credit histories of all potential hires. The report an employer sees is slightly different from the report a landlord or lender sees. It tells the employer how much debt you have and what your payment history is. Some companies may be hesitant to hire someone with multiple missed or late payments, especially for a role that requires financial responsibility.
  • Your ability to open utility accounts: When you rent an apartment, you’ll most likely need to open an account with local utility companies. Many utilities will run your credit report and use the information to determine whether you need to pay a deposit and, if so, how much the deposit should be.
  • Your ability to get lower interest rates or good loan terms: People with excellent credit tend to get excellent terms when they apply for car loans, mortgages and additional credit cards. The better your credit, the lower the interest rate you are likely to get. You might be able to obtain a loan with a smaller down payment if you have a great credit history.

What Impacts a Credit Score?

The information on your credit reports is used to calculate your credit score. A credit score is a number that typically ranges from 300 to 850, though there are some models that range from 250 to 900. The information in your credit history affects your credit score, but the two entities are separate. You can review your credit report without accessing your score. Credit scores are often calculated by separate companies, like the Fair Isaac Corporation (FICO).

FICO uses a proprietary formula to calculate scores. While the company doesn’t reveal the exact details about its formula, it has explained factors that influence a score and how each factor is weighted. FICO uses five types of information when calculating a person’s score:

  • Payment history: Payment history has the biggest impact on your overall score, and is worth 35%. Lenders are often most concerned about whether or not a person will pay their loans on time and as agreed, so a history of missed or late payments may count against you.
  • Amounts owed: The amount of money you owe represents 30% of your overall score. If you have borrowed significantly against the amount of credit available to you — like $1,800 of debt with a $2,000 credit limit — a lender may think your debt is too high and that you may fall behind on payments.
  • Length of history: Credit history accounts for 15% of your score. The longer you have credit, the higher your score will usually be. You can have a great score with a shorter credit history, as long as you pay on time and keep the amount you borrow low.
  • Mix of credit: Credit mix makes up 10% of your score. This means you may get a higher score if you have a variety of loans, compared to if you only have credit cards. Credit mix is a small factor when it comes to determining your score, so there is no pressure to open accounts you don’t need to boost your score.
  • New credit: New credit makes up the remaining 10% of your overall score. When you open a new credit account, you are likely to see your score drop slightly. Opening multiple accounts at the same time can cause a steeper decline in your score.

One misconception people often have is that checking their score or viewing their credit history will negatively affect the score. While a hard inquiry from a lender that is considering your application can cause your score to drop, a soft inquiry, such as you checking your own score, won’t have any effect. It’s smart to review your credit often, as doing so will help you detect and report any mistakes to the credit agency. The agency can review the issue and remove the inaccurate information from your report.

How to Build Your Credit Score While in College

There are several ways to build credit as a college student, even if you are starting with zero existing credit.

1. Get a Student Credit Card

There are a variety of credit cards available, from cards designed for people with long credit histories to cards for people who have a history of poor credit. Student credit card programs are designed to account for the specific credit needs and financial situations of college students. They often have a lower credit limit than other cards and relaxed requirements. If you’re in college, you are likely to get approved for a student card, even if you have a short or non-existent credit history and little income. You may need a co-signer if you are under age 21 or don’t have a high income.

The key to building credit with a student card is to use it wisely. It’s likely the limit on the card will be low, so you won’t be able to use it to make extravagant purchases. Try to avoid spending near the upper limit on your card. Instead, use it occasionally for necessary purchases like toiletries or groceries. Only use the card for purchases you can pay for right away to reduce the chance of getting into debt. If you can, pay off the purchase immediately after using the card.

2. Become an Authorized User on Someone Else’s Card

If you can’t open your own credit card or would rather not, another way to start building credit in college is to be added as an authorized user on someone else’s card. As an authorized user, you get a card in your name. The overall account owner, likely your parents, remains in control of the account. You can use the card to make purchases, but you won’t be able to request a credit line increase or access other features.

Being an authorized user won’t always help you establish credit. Before you are added as a user to someone’s card, confirm the credit card company will report the information to the credit reporting agencies. Keep in mind that if the owner of the account has a history of missing or late payments, being listed as an authorized user on their card might hurt your credit.

3. Start Making Payments on Your Student Loans

Student loans can help you build a credit history in addition to funding your education. You can get federal student loans without having a credit check. Once you have the loans, they get reported to the credit reporting agencies and show up on your history.

To make your student loans work in your favor, ensure you are making payments on them as agreed. You can start repaying your loans while you’re in school if you want to get ahead on payments and boost your credit. If you wait until you graduate to begin making payments, be sure to pay on time and pay the right amount.

4. See If Your Rent Payments Can Be Reported

While landlords can use your credit to decide whether to accept your application, rent payments are rarely reported on your credit history. Credit bureaus are able to report your rent payment history as long as they receive the information. If you’re interested in having your rent reported, you can sign up for a rent reporting service or see if your apartment’s property management company is willing to report the information.

5. Always Pay on Time

Payment history has the biggest effect on your credit, so it’s important to establish good payment habits early on. Always pay your bills by the due date to minimize the chance of late payments showing up on your report. You can set up automatic payments using bill pay through your checking account to make sure you never miss a due date.

Although it’s best practice to pay off your balance completely each month, be sure to pay at least the minimum amount due to keep your account and credit in good standing.

6. Practice Good Credit Habits

As you work to establish credit as a student, picking up good habits will help. Paying on time is a foundational habit to support a high credit score. Creating and sticking to a budget is another example of a good credit habit. With a budget, you can see how much money is available to spend and avoid borrowing more than you can afford to pay back.

Another good habit is only applying for credit when you need it. If you are out shopping, be cautious about opening multiple store credit cards at the same time. You might get a discount on the day you’re shopping, but you may see your score drop. You’ll also have to pay back the amount you charged to the cards.

7. Monitor Your Credit Score

Monitoring your credit history and score won’t necessarily help you build credit, but it can help you track changes and growth. When you keep an eye on your credit, you also have the opportunity to correct errors before they affect your ability to get a loan or a new apartment.

Mid Penn Bank Can Help You Get Started Building Credit During College

If you’re a college student in Central Pennsylvania looking to build credit, Mid Penn Bank can help. We offer credit cards specifically designed for college students who are establishing credit for the first time. Our student cards let you earn points on every purchase, which can you can redeem for cash back or other rewards. To learn more, visit a branch or get in touch with us today.



The material on this site was created for educational purposes. It is not intended to be and should not be treated as legal, tax, investment, accounting, or other professional advice.

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