How to Start Building Credit in High School and College

Categories: General Tips

Why is your credit score important?

Building and maintaining good credit is a smart step toward financial independence, and the earlier you start, the better. Having a solid credit rating is important for several big financial moves like buying your first car, applying for a loan, being screened for an apartment, and purchasing a home. Your credit score is a rating of how responsible you have been with financial decisions and how reliable you are at paying back loans on time. Credit ratings are developed using factors such as your payment history, the number of accounts and your balances, loans you have taken out, and any issues like bankruptcies or foreclosures.

How do you build good credit early?

Many young people do not yet have things like their own loans or accounts to help boost their credit rating. So how do you build good credit early? You can start building solid credit by opening a low-limit credit card, using it for minor purchases, and paying the bill on time and in full. Begin by charging small purchases on your credit card like clothing, meals, and entertainment. You could also use it just for a specific type of expense like gas or monthly cell phone bills. Each month when you get your credit card statement, review it to make sure the purchases you made are accurate and pay it off in full. This will begin to build your credit rating month by month in a small and manageable way.

Types of credit cards

There are many different types of credit cards available. For your first card, consider things like the limit of how much you can spend, fees, and interest rates on the balance if you do not plan to pay each monthly statement in full. Keep in mind that lower-limit cards may be a smart choice to start with in order to avoid overcharging and not being able to pay off the balance. (This could negatively affect your credit score and might end up costing you more money in interest payments.)

Opening a card with the same financial institution with which you have a checking or savings account, is also a good choice. You can conveniently pay off the statement by easily transferring money from your account to the card’s balance. There are other perks, too, like managing all of your accounts in one place, easily reporting lost or stolen cards, and disputing a transaction if needed. 

Check The Summit Federal Credit Union’s no-credit credit card option, or make an appointment with a Relationship Specialist at our Virtual Branch to learn more.