As college students prepare for their future, good grades and internships are likely the priority. But starting to build their credit can also be important since a solid track record can be instrumental in attaining life goals ranging from buying a car to obtaining their first mortgage.
Credit card companies can no longer ply students with free pizza and T-shirts to get them to open an account thanks to the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. But students can still get a card starting at age 18, though if they’re younger than 21 they’ll need independent income or a co-signer to qualify.
Whether you’re a college freshman or senior, opening a credit card isn’t a task to be taken lightly since making late payments or taking on too much debt can harm you financially. So how does a student get that first credit card, and what should they and their parents consider before taking that step?
Here’s some advice from credit experts at USA TODAY/Blueprint.
Do you need a credit card?
Building a credit history is important to your financial future. A solid track record can help you borrow money to buy a home, finance a car or pay for your education. And if you show that you consistently pay on time, you may qualify for lower interest rates which make borrowing costs cheaper.
Learn more: Best credit cards of 2023
Your credit also matters in other important areas. Landlords, for instance, often check your payment history before agreeing to rent you an apartment, and employers may do a credit check before offering you a job.
Still, you have to be ready for the responsibility. You don’t want to open a credit card if you don’t have the income or discipline to make regular, on-time payments.
How do you get a card?
You can apply for a student credit card, which doesn’t call for applicants to make a security deposit − unlike secured cards that carry such a requirement.
To find options, you can just click online since many sites enable you to compare interest rates, perks and what’s necessary to qualify. USA TODAY/Blueprint also has a list of the best student cards for borrowers without credit. The top picks don’t have an annual fee, allow the user to get cash back, and report the borrower’s history to the big credit bureaus − TransUnion, Equifax and Experian − so you can start building a credit footprint.
Your first card will probably have a low spending threshold, but if your payments are always on time, your credit score will build and improve, and you’ll eventually be eligible for cards with higher limits as well as good interest rates.
A parent can also make their college student an authorized user on one of their cards, enabling them to establish a payment track record so long as the card issuer reports the students authorized spending to the three major credit bureaus. Not every card does that however, so definitely ask.
Student credit cards:Here are the top picks
Can you get a credit card if you’re 18?
Yes, but it’s not easy.
The minimum age to get your own credit card is 18. But you have to show that you have enough money to make the payments without relying on a parent or friend. If you don’t have solo income, you’ll likely need a co-signer who has a solid credit history of their own. And not all credit cards accept co-signers.
The CARD Act of 2009 put various safeguards in place for consumers, including prohibiting gift giveaways by card issuers to entice young people to open accounts and establishing 21 as the age when a young borrower no longer needs another signer to qualify.
Getting a credit card if you’re 21
Whatever your age, you’ll need to satisfy various criteria to be able to get a credit card, including a credit check by the card issuer that determines the interest rate you qualify for. Card companies might also look at how much income you have and your job status.
You may be able to prequalify for a card, which provides a clearer picture of which cards you might be able to get once you formally apply. Still that’s no guarantee that you’ll be approved.
Once you have the card, what affects your credit score?
A credit score is a three-digit number that helps banks, landlords and other lenders get an idea of how risky it is to give you a loan or provide other services. Information in your credit report determines that number.
Five factors are assessed, and some count more than others. They are:
- Payment history (35%): This the most important piece of the calculation. Paying on time consistently can give your score a major boost.
- How much you owe (30%): Carrying a balance isn’t terrible, but if you owe an amount near or at your total card limit, that can be a red flag you’re stretched thin financially and turn off creditors.
- Credit history (15%): Having a longer credit track record can be helpful to your score since lenders check the age of your accounts, and the average amount of time overall that you’ve had them.
- Credit variety(10%): Having a range of accounts, such as credit cards, revolving credit accounts and loans, can also help increase your score.
- New accounts (10%): Opening a bunch of new credit cards in a short range of time can shave points off your credit score. So try not to overdo it.
New to credit cards:Here are the best picks for first time credit card users
Boosting your credit score and history
There are several things you can do to establish a strong credit score and history.
- Don’t over spend: Only charge what you can afford to pay off each month.
- Pay on time: Timely payments every month are critical to raising and maintaining your credit score and that can then help you access more financing at a good interest rate down the line.
- Pay the whole bill: When you carry a balance from one month to the next, you’ll be charged interest, also known as APR. When you pay your whole bill off each month, you don’t have to pay that extra money and you also keep down your debt.
- Maintain a low balance: When you do have a balance, keep it low because creditors look at the overall amount of credit you can tap vs. the amount you are using. Having more unused than used credit suggests you know how to budget.
Contributing: USA TODAY/Blueprint
