For college students, building a good credit score is important for future financial needs, such as renting an apartment, getting a car loan, paying for a house or even for starting a business. Using a credit card responsibly is one of the easiest ways to start building your credit, and it doesn’t require going into debt.
The key to building credit without long-term debt is paying off your balance in full every month. When you make purchases with your credit card, use your bank account balance as a guideline for your spending limit so you have enough money to pay it off.
Then, before the due date, pay the full amount you owe. This avoids interest charges while still showing credit bureaus that you can borrow money and pay it back responsibly, making your credit score go up without going into debt.
Another important factor is keeping your credit utilization low. This means you shouldn’t max out your credit card. A good rule is to use less than 30% of your credit limit. For example, if your credit card limit is $1,000, try not to let your balance go over $300, even if you pay it off each month.
Lower utilization shows lenders that you’re not dependent on credit, therefore making you less of a risky client.
In addition, never miss a payment. Payment history is the biggest part of your overall credit score. Set up automatic payments or reminders to make sure you’re always on time. If you’re just starting out, consider a student credit card or a secured credit card if you’re not approved for a regular one.
Over time, with consistent use and full payments on time, you’ll build a strong credit score while avoiding long-term debt. Credit cards are tools, not extra money. Use them smartly, and you’ll set yourself up for financial success.
Kaylee DeLand can be reached at [email protected].