Your student schedule is busy. You’re working to help pay for school, studying for that perfect 4.0, and — let’s not forget — taking advantage of your newfound freedom on campus.
Out of all the things demanding your attention, your credit score may not earn the top spot on your list. But it should!
CNBC reports the average credit score for someone 18 to 24 years old is 672, but only if they have a credit card. Without it, the average drops down to 589.
That’s in solid subprime credit territory, which has a major impact on your financial future, on- and off-campus. To make sure you set yourself up for success, check out this guide to improving your credit while you study.
Building Positive Payment History is the Most Important Thing You Can Do
Paying your bills on time makes up the cornerstone of responsible credit use. It signifies to lenders and anyone else checking your credit that you’re dependable.
Always make sure you pay bills when they’re due. Delinquent payments can negatively impact your score, even if you’re just a few days late.
Establishing a positive payment history isn’t always easy when you’re starting out. You may not have a lot of open credit accounts that report to the top credit agencies that calculate your score.
But don’t worry. Even college students can build credit by:
1. Leveraging rent payments
Normally, credit agencies won’t look at your rent payments when they calculate your score — which is a shame. This is one of the largest and most frequent payments you make.
Luckily, you can contact rent-reporting services that help make these payments count. Some cost an annual fee, but you can find some that add rent payments to your report for free.
2. Open an online line of credit
Paying off a line of credit is a good way of creating a positive payment history. The only problem is some of the biggest banks are hesitant to open a line of credit if your score is already subprime.
If you’ve been denied a mainstream line of credit from the Big Banks, look to alternative online lenders. Many of them offer online lines of credit that don’t require a prime credit score.
Although they may look at your credit score, they also look to other financial info to determine your responsibility as a borrower.
If you pass the test, you’ll receive all the benefits of a normal line of credit — including the opportunity to build credit. To find out how some line of credit lenders report your payment history to major credit agencies, click here for more information.
But remember, your credit score is a dynamic number that’s affected by a number of different factors. It’s not enough to only pay back your line of credit to improve your credit score when you’re defaulting on other loans. Be sure to make all your debt and bill payments in a timely manner.
3. Keep on top of your student loans
Most student loans don’t require you to make payments while you’re in school, or during a short grace period after you graduate. But if you can manage to do it, making even small payments while you’re enrolled can help.
If you make timely payments throughout your academic career, this will go a long way to establishing and improving your credit score.
There also comes the added benefit of reducing what you owe in loans. Not only will you develop a positive payment history, but by lowering your principal, you’ll reduce the interest you accrue over time.
Hit the Books on Your Finances
By now, you should be a master of juggling responsibilities. Between coursework, your job, and relationships, you can multi-task like the best of them.
So add your finances to your list of priorities. Spending some time managing your credit now can help you when you’re ready to leave campus.