During your years at college, you will need to dedicate your time and energy to two types of credit: your course credits and your financial credit. Read ahead to see how you can manage the latter as effectively as possible.
What Credit Options Do You Have?
It’s not likely that you have a credit account just yet. You’re still young. Find out what options you can look into this year.
A credit card is a form of revolving credit. Revolving credit is credit that can be borrowed and repaid repeatedly. It doesn’t disappear after one use. As long as you pay down the balance, you can use your card over and over again.
You must be at least 18 years old and have a regular source of income to apply for a credit card. Due to the CARD Act of 2009, you may need to have a cosigner to get your application approved if you’re under the age of 21. A cosigner is someone who agrees to take responsibility for repayments when the primary borrower fails to do so. Your parent or guardian could act as a cosigner for you.
When you’re shopping for credit cards, look into options that are specifically designed for college students. These will have minimal qualifications and lower fees.
What if you don’t get approved for a card? If you can’t get approved, you could try to become an authorized user on a parent or legal guardian’s card. Obviously, this means that your transactions will be monitored by them. You will want to be careful not to make some unwise purchases directly under their nose.
Or you could try another credit option.
Line of Credit
Another credit option available to you is a personal line of credit. This is another type of revolving credit. As long as your account is in good standing and you replenish the balance, you can use the credit over and over again. This quality makes a line of credit a handy financial tool to have in your back pocket.
Similar to credit cards, you need to be at least 18 years old and have a steady income to apply for a personal line of credit. You can apply for this option at your bank, or you can find options for line of credit loans online and streamline your application process. This way, you can fill out your application at home.
How Can You Use Your Credit Responsibly?
Once you get your credit accounts, you should follow these simple credit tips to make sure that they stay in good standing.
Stay within Your Means
It’s easy to overspend with credit. You don’t have to have the funds sitting in your checking account to make a purchase. You can just put the charge on your card! This type of thinking can encourage you to use up a lot of credit and end up with bills that you can’t afford to pay off.
Remember: credit is borrowed. You have to repay those purchases that you charge onto your accounts, and you will have to do it with interest. So, it’s important that you make purchases that you can afford to pay off once your bill comes in. Stay within your means, and don’t dig yourself into debt that you can’t crawl out of.
Keep the Balances Low
Your credit accounts will have pre-set limits — this is how much you are entitled to borrow. These limits should be thought of as strict boundaries, not goals to reach. If you reach that threshold, you will max out your account and use up all of the available credit. This can present a few issues:
- You have no more credit to use for emergencies or essential purchases.
- You have a high debt load that will be difficult for you to pay down in a reasonable time.
- Your balance will still collect interest, meaning you will need to pay more than the pre-set limit.
- Your bank could raise your interest rate as a penalty.
- You could lower your credit score.
So, you should keep your balances far away from the limits. Aspire to have them at least below the halfway points. They will be much easier for you to manage when they’re low.
Pay on Time
Pay your credit bills on time, every time. If you can’t pay the bill in full, you can at least make the minimum payment — this will stop you from getting a late fee and hurting your credit score.
You will want to do your best to keep your credit accounts private and secure. You don’t want the wrong person to access this sensitive information. Here are some things that you can do to ensure your accounts stay safe:
- Set strong passwords and security questions
- Do not share a picture of your credit card on social media
- Do not tell people your account information or passwords
- Do not let anyone borrow your card
- Beware of credit card skimmers and shimmers
- Check your accounts often to see if you notice any of the warning signs of identity theft
Think of this as another learning opportunity! By the time that you graduate, you’ll be completely comfortable as a credit user.