How College Graduates Should Build Credit

Are you, or do you know a student who just graduated from college? Have you considered building the credit score? Shortly after college was the first time I think I ever thought about my score. I headed out to buy a new car and was told I didn’t have that great of credit. I didn’t know really what that meant or how it could be changed, but I did see that my interest rate was ridiculously high.

Fast forward several years later and I’ve improved my score and have now learned quite a bit about what makes up a score and how to raise my credit score. Armed with that knowledge and with a little help from the National Foundation for Credit Counseling (NFCC), I’m prepared to give the recent graduates some information about building credit right out of the gate.

Carefully Apply for Credit – Applying for too much credit can harm your credit score. It’s tempting when you get your first job to run out and put a bunch of things on credit. After all, you have this new income to support payments you’ll need to make. My best advice is to slow down and do your research and find the best loans to be associated with. Particularly with credit cards, do some research and find a card that is going to suit your needs. You don’t want to be applying for a new card every month because the one isn’t working out.

Do your research! Find your card amongst this list of the best credit cards for college students available today.

Use Credit Wisely – Next, and likely most important, become a responsible borrower. Always pay on time. You really can’t afford a late payment on your record right now. Also, try and pay your balances off each month. At a minimum, keep your balances below 30% of your overall available credit. Lastly, try and develop a diverse set of credit on your file. The NFCC recommends at least 3 different loans in your credit file. Lenders like to see that you are capable of handling the different types of credit: revolving (credit cards) and installment (personal loan, car loan, mortgage, etc).

Find a Co-Signer or Go Secured – If you are having trouble getting a loan or a credit card initially, consider wearing the credit crutches for a little while. Getting a co-signer or getting a secured credit card are two common methods for building credit history when credit isn’t freely available to you. You could also look into a builder loan from a credit union or from a company like Self Lender. Look at this as a temporary move to help you get over that first hurdle. I’ve seen reports that it takes about a year to move from a secured card to an unsecured one.

What are some other ways for college graduates to build credit history?

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon. He created this website back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence. He uses Personal Capital to track his wealth. All the content on this blog is original and created or edited by PT.