Why Your Credit Score Is Important as a Student

College is even better with the right credit cards. Don't miss out on deals and cash back!

Attending college comes with a host of new responsibilities, and your parents have (hopefully) sent you off with the wisdom and encouragement you need to handle those responsibilities on your own. Your studies and your GPA are your top priorities, but you may have other obligations that are important too. Whether you are responsible for paying tuition, holding a part-time job, or fulfilling an internship, these life-learning experiences can help you prepare for your future career.

While you’re busy writing term papers and picking up weekend shifts, though, there’s something else you should be working on: your credit score. That little number will play a significant role in your financial future, so here’s a closer look at why your credit score is so important as a student and how you can build, maintain, and keep your credit score in tip-top shape.

Why Credit Matters

1. Your future job opportunities may depend on it.

Once you graduate, you will be applying for jobs that will kick-start your career, and your goal is to land a job that not only makes you good money but is enjoyable as well. If you’re not careful, though, a poor credit score could keep you from getting that dream job.

Many employers run credit checks before they hire a candidate. A good credit score tells an employer that you are an organized and responsible person. You may have all the qualities they are looking for and your skill set may fit every description to land the job, but if your credit score is in bad shape, your opportunity may be given to another candidate with the same skill set and a better credit score.

2. Good credit could help you land your first apartment.

You may decide to live at home with your parents for the first few years after graduating college. This temporary arrangement can help you save up enough money to get yourself out on your own and into your first apartment. But keep an eye on your credit during this period, as it could impact your ability to get an apartment down the line.

Even if you have enough money for the deposit, your future landlord wants to be assured that you will be a responsible tenant that pays the rent on time, so they may check your credit report. If your score is low and your credit report shows that you aren’t paying your creditors on time, you may not get approved to rent the apartment.

3. You usually need solid credit to secure the best interest rates on loans.

Want the best interest rates on your future auto loan or mortgage? Then you need good credit. Getting the best interest rates on car loans, home mortgages, or any other type of loan generally requires a great credit score.

Lenders will base your interest rate on multiple factors, but your credit score will often carry a lot of the weight in that determination. If your credit is pristine, you have the upper hand—with a better chance to negotiate in your favor. Shopping around for the best interest rates on loans is easier with an excellent credit history and score.

Once you understand why your credit score is important, you’re ready to start building and maintaining it.

How to Start Building Credit

If you are starting from scratch as a college student and don’t have any credit history, a secured credit card is the safest and best option. A secured credit card is one of the best ways to build credit because an up-front refundable cash deposit is required to serve as your credit line. The cash deposit also serves as collateral in case you default on payments. In some cases, you might qualify for a credit line that’s higher than your deposit, but you can always expect to put some money down for a secured card.

While you never want to default on any credit card and should avoid it at all costs, that deposit does provide a way for you to pay off the card if you come upon unfortunate financial circumstances. However, even though the credit card company may be able to recoup the amount owed with your deposit, your late payments will still be reported to the major credit bureaus and you may still incur interest and late fees.

If you make purchases and pay the balance in full and on time consistently, you will create a positive credit history, and at that point, you will be able to apply for an unsecured credit card. Just keep in mind that if you are under 21 and do not have proof that you are employed, you will need a parent to co-sign your credit card.

How to Keep Your Credit in Good Shape

It may be tempting to treat yourself to something you want when you first receive that credit card, but you should try to steer clear of making purchases that are not necessary. Understanding your wants versus your needs is key to keeping your spending habits in check.

It’s important to live within your means and to keep your credit card balances well below your credit limit. It’s also crucial to pay your credit card bills on time consistently. Having a budget and cap on your spending each month will also help you maintain positive financial habits and make good decisions before buying. And once you have built credit and established a good credit history, you’ll still want to continue these steps to keep your score healthy and robust well into the future.

Credit is a big deal. Whether you’re just starting to build credit or have been working to build your score for a while, regularly checking your standing is a great practice—it’ll give you insight into your credit habits and alert you to any fraudulent activities that might be hurting your score. You can check your credit report for free at Credit.com.

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The post Why Your Credit Score Is Important as a Student appeared first on Credit.com.

Best Student Credit Cards September 2017

Getting a credit card while you’re in college might seem dangerous or confusing. But if you are able to use a student credit card responsibly, you do not need to be afraid, and you can set yourself up for financial success after you leave school.

Fortunately, learning how to choose and use the right student credit card is relatively simple. Make sure you avoid annual fees and go with a bank or credit union you can trust. When you get the card, make sure you use it responsibly and pay the balance in full and on time every month. If you do these things consistently over time, you can leave school with an excellent credit score. And if you want to rent an apartment or buy a car, having a good credit score is very important.

Our Top Pick

Discover it® for Students

APPLY NOW Secured

on Discover’s secure website

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Discover it® for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 5%
APR
13.99%-22.99%

Variable

Credit required
zero-credit
New to Credit

Best for Commuter Students

Discover it® chrome for Students

APPLY NOW Secured

on Discover’s secure website

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Discover it® chrome for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 2%
APR
13.99%-22.99%

Variable

Credit required
fair-credit
Fair Credit, New to Credit

Best Flat-Rate Card

Journey Student Credit Card from Capital One

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on Capital One’s secure website

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Journey Student Credit Card from Capital One

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 1.25%
APR
24.99%

Variable

Credit required
fair-credit

Average Credit

Best Intro Bonus

Wells Fargo Cash Back College℠ Card

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 3%
APR
11.90%-21.90%

Variable

Credit required
fair-credit
Fair Credit

Best Credit Union Card

Altra Federal Credit Union Student Visa

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on Altra’s secure website

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Altra Federal Credit Union Student Visa

Annual fee
$0 For First Year
$0 Ongoing
APR
14.90%

Fixed

Credit required
zero-credit
New to Credit

Also Consider Also Consider

Golden 1 Credit Union Platinum Rewards for Students:

This credit card offers a snazzy rewards program: rather than accumulate points, you’ll get a cash rebate instead. All you have to do is make a purchase. At the end of the month, you’ll get a rebate of 3% of gas, grocery, and restaurant purchases, and 1% of all other purchases deposited back into your Golden 1 savings account at the end of the month. You can join Golden 1 by joining the Financial Fitness Association for $8 per year and keeping at least $5 in a savings account.

What should I look for in a student credit card?

The most important thing to consider when looking for a student credit card is that it charges no annual fee. You should never have to pay to build your credit score. Fortunately, most student cards don’t charge you an annual fee, but it’s still something to watch out for.

The second most important thing you should keep an eye out for are tools that help you learn about credit or even promote good credit-building habits. For example, some student credit cards will give you a free monthly FICO score update. You can use this freebie to see in real time how your credit score changes as you build credit history by keeping the card open, or paying down your credit card balance, for example.

The last thing you should be considering when picking out a student credit card is the rewards program. I know, I know, it seems counterintuitive. But stick with me — I’ll show you why in the next question.

Why shouldn’t I be concerned about maximizing my rewards while in college?

Rewards cards are nice to have. But if you’re a college student, here’s the truth: you probably won’t spend enough to earn meaningful rewards.

Why? With a good rewards program, you can earn points or cash back. A small percentage of your monthly spending can add up quickly. However, given the tight budget that most college students live on, it will probably take a while to earn meaningful rewards. For example, if you earn 1.25% cash back and spend $300 a month on your card, you would earn $45 of cash back during the year.

College students are very good at making good use of $45. And our favorite card offers a great cash back rewards program. Just don’t expect to earn a lot of cash back, given the tight budget of a college student.

Why should I get a credit card as a college student?

There are a lot of great reasons why you should get a credit card, as long as you can commit to using it responsibly.

The single biggest reason why you should get a credit card as a college student is because you can start establishing a credit history now. When you graduate from college, you will need a good credit score to get an apartment. And your future employer will likely check your credit report. Building a good credit history while still in college will help prepare you for life after graduation.

Getting a credit card while in college can also train you to develop good credit habits now. But you need to be honest with yourself. If you find that you can’t avoid the temptation of maxing out your credit card, you might want to switch to a debit card or cash.

Finally, getting a credit card now can be the motivation you need to start learning about credit. These skills aren’t hard to learn, and they could save you thousands or even hundreds of thousands of dollars later in life (when you want a mortgage, for example).

What is the CARD Act and why should I care about it?

Many years ago, credit card companies would market on college campuses. You could get a free beer mug or t-shirt in exchange for a credit card application. And you would be able to qualify for a credit card without having any income. The Credit Card Accountability Responsibility and Disclosure (CARD) Act was signed into law in May 2009 to change a number of practices.

How did the CARD Act change student credit cards?

The CARD Act made a lot of changes in how credit card issuers do business with students. One of the biggest changes was requiring students to be able to demonstrate an ability to pay. If you are under 21 and do not have sufficient income (a campus job, for example), you would need to get a co-signer.

In addition, colleges must now limit the amount of credit card marketing on campus. The days of free t-shirts and pizzas in exchange for credit card applications are gone. But that doesn’t mean it is impossible for a college student to get a credit card. Some highly reputable banks and credit unions still offer student cards. And building a good credit score while still in college is still highly recommended.

How can I protect myself from racking up debt?

When used properly, credit cards are a very convenient method of repayment. However, when not used properly, you can end up deep in credit card debt. It is important to establish a healthy relationship to credit now, with your first credit card.

You should try to ensure that you pay off your credit card bill in full and on time every month. Ideally, you should set up an automatic monthly payment. And to keep yourself on track, take advantage of alerts offered by most credit card companies. You can even get daily text messages reminding you of your balance.

How can I automate my credit card usage?

If all of this sounds confusing, don’t worry. There’s actually a way you can automate your payments so you never even have to bother with the hassle of using a credit card. All it takes is a few minutes of upfront work.

First, you’ll need at least one recurring monthly bill of the same amount, such as Netflix or Spotify. Log in to your account and set up an automatic payment each month using your credit card. Make a note of how much your monthly bill costs.

Next, log in to your bank account. Set up a second automatic payment to go to your credit card each month for the same amount as the bill. If your bank doesn’t offer the option to set up automatic payments, you may also be able to set up your credit card to automatically withdraw the amount of the bill from your bank.

Because you know this bill will be for the same amount each month (barring any price increases), you can literally just leave this running in the background each month on autopilot. You don’t even have to carry your credit card in your wallet if you don’t want to. Then, when you graduate, you’ll automatically have an improved credit score!

What happens to my student credit card when I graduate?

Congratulations! You’ve made it to the finish line. But what about your student credit card? You will have a few options once you graduate.

First, you can simply keep it. You will want to keep the credit card open, because it helps you build a long credit history. However, you might want to call your credit card company and ask if you can migrate to a standard (non-student) credit card.

But if you have been using your credit card properly, you will have an excellent credit score when you graduate – and you will be able to get any credit card that you want.

Here is a summary of our favorite cards:

Credit cards
Best for

The post Best Student Credit Cards September 2017 appeared first on MagnifyMoney.

How Your Tax Refund Can Help Your Score Better Credit

Use your tax refund the right way and it could help build your credit.

If you’re getting a tax refund this year, you’ve got three major options when it comes to using the money: You can save it. You can invest it. Or you can splurge. But break things down a little further, and that check (back) from Uncle Sam can help you build credit, too. For serious.

Here are six ways your tax refund could help you build — or even establish — your credit scores.

1. Pay Down Credit Card Balances

Second rule of credit scores: Keep your debt level below at least 30% (and ideally 10%) of your total available credit. Anything beyond that is bad for your credit utilization ratio. If you’re over that limit or, worse yet, bumping up against your limits, putting your tax refund toward your credit card balances can help improve your credit score. Better yet …

2. Pay Off High-Interest Credit Card Debt

Because those balances are going to spike pretty fast. Plus, you’ll be saving money in the long run. Good rule of thumb when it comes to dealing with multiple credit card balances: Make all your minimums, but put more money toward either the smallest (because motivation) or the one with the highest annual percentage rate (because, like we said, it’ll cost you less). You can see how your credit card use is affecting your credit by viewing two of your scores, updated every 14 days, on Credit.com.

3. Get a Secured Credit Card …

If you’ve got thin-to-no credit, consider using your tax refund to open a secured credit card. Secured credit cards are easier to get than other types of credit cards because they require the cardholder put down a deposit (usually $200 to $300) that serves as the credit line. (Or vice versa. That’s a little bit of a chicken-or-the-egg thing.) In any event, if you’re close to cash-strapped, you can use your tax refund to open the card. That line of credit will help you establish a payment history, the most important factor among credit scores — so long as you pay your charges off by their due date, of course.

4 … Or a Credit-Builder Loan

Credit-builder loans, available at your local bank or credit union, are essentially the installment loan version of a secured credit card. You “borrow” money (that’s where you tax refund comes in), which gets put in a savings account, then you make a series of monthly payments and get access to the money once the “loan” is paid in full. Credit-builder loans usually involve paying some interest on the money you’re borrowing/depositing, but they basically provide people who otherwise don’t have credit with the opportunity to build some.

5. Pay Off That Collections Account

OK, here’s the thing: Paying a collection account probably won’t get that item off of your credit report. Legally, it can stay there for seven years plus 180 days from the date of the delinquency that immediately preceded collection activity (more on how long other stuff stays on your credit report right here). And there’s no guarantee it’ll boost your score once it’s paid off.

Still, most credit scoring models treat paid collections differently than unpaid ones (they tend to carry less weight) and the newest scores actually ignore paid collections entirely. Plus, some collectors are changing their tune when it comes to pay for removal deals and immediately reporting the account to the credit bureaus.

Quick side note: We’re talking about legitimate collection accounts here, so if a collector comes calling, be sure to verify the account belongs to you. There are debt collection scammers out there and it’s not unheard of for a legitimate collector to get the wrong guy. Under federal law, collectors are required to send written verification of a debt to a debtor five days after first contact, so that slip of paper should give you an idea of whether you’re liable for the payment.

6. Start an Emergency Fund

Yeah, we know, money in a savings account isn’t going to do anything for your credit score … right now. But socking away some dollars for a rainy day can keep you from going to the old credit card when one comes. And that’ll keep your credit utilization on the right side of 30%. Plus, you’ll skip the interest. If you’re not carrying any debt and your credit is in OK shape, consider putting Uncle Sam’s check in a high or at least higher-yield savings account. Your credit score may thank you down the line.

Not getting a tax refund this year? No worries, we’ve got more ways you can fix your credit here.

Got more questions about building credit? Ask away in the comments section and one of our experts will try to help!

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The post How Your Tax Refund Can Help Your Score Better Credit appeared first on Credit.com.

Hate Credit Cards? There’s Still a Way to Build Credit & Avoid Debt

hate-credit-cards-but-need-credit

If you want to build credit, don’t want to go into debt and don’t want to use a credit card, you’ve got a bit of a problem. You can definitely build credit without going into debt, but that generally requires using a credit card. There are plenty of ways to build credit without using a credit card, but they generally require going into debt. It’s frustrating, we know.

Things like utility payments and rent are sometimes reported to the credit bureaus and are factored into a few credit scoring models, but it’s far from the industry standard right now. There’s some good news, though: There’s a debt-free, low-maintenance, credit-building strategy you might not despise.

Step 1: Check Your Budget for a Recurring Bill

Most people have at least one consistent monthly expense. These are often subscriptions (like Netflix or a magazine) or small bills (like an insurance premium or a cell phone bill). Many of these can be set to automatic payments, and many of them can be paid with a credit card without an additional credit card processing fee. See if you can find one. Got it? OK, you’re not going to love this next step, but give it a chance before you freak out.

Step 2: Get a Credit Card (Wait, What?)

Yes, this strategy requires a credit card, but you hardly ever have to use it. You may never take it out of your wallet (and, really, you could probably just keep it locked up at home). If you don’t have a credit card, you’ll first want to check your credit score, which you can do for free on Credit.com, to see what you might be able to qualify for. There are credit cards for people with bad credit and no credit, but keep in mind that some credit cards carry annual fees or require a deposit in order to access a line of credit. Still, you can get a credit card for a relatively low cost (or for free), and if you pay off the balance on time every month, your purchases won’t accrue interest. (See? No debt.)

Step 3: Pay Your Small, Recurring Bill With Your Credit Card

Set up your automatic payment to hit your credit card.

Step 4: Pay Your Credit Card Bill

You can either manually pay your credit card bill as soon as the other bill payment hits, or you may want to set up another automatic payment, this time for your credit card. Make sure you’re paying it on time and in full each month, because that’s what’s going to build a positive credit history and keep you from going into debt.

Step 5: Check Your Progress

It’s easy to “set it and forget it,” and that’s sort of the idea here, but you don’t want to forget it and accidentally miss a payment because you haven’t updated your account or a payment didn’t go through as it was supposed to.

Some Extra Tips

When you’re deciding if this strategy is right for you (and it’s not for everyone), remember that part of what builds a good credit score is using as little of your available credit card limit as possible. So, if you have a very low credit limit on your credit card, the bill you choose to pay with it should be fairly inexpensive, if you want to get the most out of this strategy. Making sure this goes right requires attention to detail — it can backfire if you miss a credit card payment, max out the credit card or miss the bill payment and it ends up in collections — and it’s also a good idea to check your credit score regularly to make sure it’s having the effect you want it to.

Find the perfect credit card for you using our credit card finder tool.

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The post Hate Credit Cards? There’s Still a Way to Build Credit & Avoid Debt appeared first on Credit.com.

Do You Start With a Credit Score of ‘0’?

what_is_the_lowest_credit_score

When you think about it, credit scores have a lot in common with the SATs: They stress people out, involve tough-to-answer questions and play a huge role in determining whether your applications (albeit for financing) get denied.

There’s another notable similarity, too, which you may not know about: When it comes to credit scores, you can’t get a zero.

The Lowest Possible Credit Score

Most major credit scoring models, including standard FICO and Vantage Scores, have a range of 300 to 850, with 300 representing the lowest, or worst, possible score and 850 representing the highest, or absolute best. (You can learn more about what constitutes a good credit score here.)

Some specialty scores, including the FICO Industry Option scores, have a lower minimum (250), but, generally, no matter what model we’re talking about, “you don’t start at zero and, let’s say, work your way up to a respectable score over time,” Barry Paperno, a credit scoring expert who worked at FICO for many years and now writes for SpeakingofCredit.com, said in an email.

You also don’t really start at a 350. That’s because until you meet a model’s minimum criteria, you won’t have any score at all. In that case, the credit bureaus will let a lender (or landlord or cable company or anyone else requesting your credit as part of their application process) know that you’re score-less.

“When a score can’t be computed because the credit report doesn’t meet the minimum scoring criteria, an alpha or numeric ‘exclusion code’ is transmitted to the requester indicating one, that no score can be calculated, and two, a general reason why the credit report didn’t meet the minimum scoring requirements,” Paperno said.

No Panic Necessary

Thin-to-no credit can certainly make it harder to secure a loan, but there are lines of credit specifically designed to help people in that demographic (see secured credit cards, student credit cards or credit-builder loans) establish a credit history. And, after you get ahold of some starter credit, it shouldn’t be too long before a model is able to calculate your score. For instance, the minimum criteria for the FICO scoring models, Paperno said, generally includes:

  • At least one account opened more than six months ago
  • At least one account reported to the credit bureau within the past six months
  • No indicator on the credit report that the consumer is deceased

Moreover, once you meet this criteria, you could conceivably find you have a decent score — so long, of course, as you’re using your credit account(s) responsibly.

“For instance, you can be 18-years-old with a secured card opened six months ago, pay on time every month, keep a low utilization, and your first score can be in the high 600s,” Paperno said.

Remember, to build good credit in the long-term, you want to make all loan payments on time, keep the amount of debt you owe below at least 30%, and ideally 10%, of your total available credit limit(s), and add a mix of accounts to your credit file as your score and your wallet can handle it. You can track your progress toward building good credit by viewing two of your credit scores for free each month on Credit.com.

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The post Do You Start With a Credit Score of ‘0’? appeared first on Credit.com.

I Don’t Need a Credit Card But Want to Build Credit. What Can I Do?

build_credit_without_credit_card

Good credit is essential if you hope to borrow money one day for things like a new car or home. But good credit can also be important for smaller things like renting an apartment or even landing a new job. And one of the easiest ways to build the credit necessary for these things is by getting a credit card.

If you have no credit, or even bad credit, and you’re averse to getting a secured credit card to help improve your credit, there are other ways to go about establishing and building good credit.

Here are three other options for building credit and improving your credit scores.

1. Get a Credit-Builder Loan

A credit builder loan is a loan with a set amount you pay back over a set period of time (referred to as an installment loan). Most have repayment terms ranging from six months to 18 months, and because these loans are reported to one or more of the three national credit reporting agencies, on-time payments will help build up your credit.

Here’s how it works: A lender places your loan into a savings account, which you can’t touch until you’ve paid it off in full, allowing you to build credit and savings at the same time. And because loan amounts for credit builder loans can be quite small (just $500) it can be much easier to make monthly loan payments.

Credit-builder loans are best for people with no credit or bad credit. But, if you have good credit but don’t have any installment accounts on your credit report, a credit-builder loan could potentially raise your score since account mix is another major credit-scoring factor.

2. Pay Your Rent 

If you’re in the process of moving or need to do so in the near future, it’s a good idea to find a landlord who reports your rent payments to the major credit bureaus. Depending on what credit report or credit score is being used, these on-time monthly rent payments can give you a quick and easy credit reference and help you qualify for a loan (or at least another apartment down the road).

3. Become an Authorized User

Asking your spouse, partner or even your parent to add you onto one of their accounts as an authorized user could give your credit a boost. If the account they put you on has a perfect payment history and low balances, you’ll likely get “credit” when that account starts appearing on your credit reports. You won’t necessarily need to use the card to benefit from this strategy. It is a good idea to have your friend or family member check with their issuer to be sure that it reports authorized users to the three major credit reporting agencies (not all do).

Remember, one of the most important things in building good credit is making timely loan and bill payments. Bills like rent or utilities may not be universally reported to the credit bureaus, but if they go unpaid long enough, they can hurt your credit, especially if they go into collection. (You can see how any collections accounts may be affecting your credit by viewing your two free credit scores, updated each month, on Credit.com.)

If your credit is in rough shape, due to a collection account or other payment history troubles, you may be able to improve your scores by paying delinquent accounts, addressing high credit card balances and disputing any errors that may be weighing them down. And remember, you can build good credit in the long term by keeping debt levels low, making timely payments and adding to the mix of accounts you have as your score and wallet can handle it.

[Offer: If you need help fixing your credit, Lexington Law can help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

More on Credit Reports & Credit Scores:

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