How do you build good credit as a student? Here are 5 important ways

As a student, managing finances can sometimes be difficult. Building a credit score can help you get the lowest interest rates while applying for loans. A healthy credit score also helps you get the credit cards you want with high spending limits and exclusive deals. As a student, building credit can seem like a challenge as you begin this process.

However, this is the best time to obtain good credit, which will help you have a good financial status later in life. Let’s discuss how you can jump-start your credit-building journey and plan for your financial independence as a student.

Apply for a student credit card

A student credit card is one of the best ways to keep track of your credit history. The minimum age for applying for a credit card is 18 years. However, some cards have a minimum age of 21 for specific cards. If you are under 21 years old, you may need a guarantor or proof of income.

Select a student credit card from a reputable bank and understand the fees and interest charges before applying for the card. In fact, there are many student cards that offer relatively simpler eligibility criteria than other cards on the market.

If you cannot get an unsecured credit card, you can opt for a secured credit card. This requires a deposit, which also forms your credit limit.

Maintain low credit utilization

You should refrain from making unnecessary purchases, although it may be helpful to use a credit card that offers sufficient credit for your purchases. It is important that you do not reach the limit on your card and do not use more than 30% of the total limit.

This reflects a wise decision-making habit and increases your credit score. You should try to keep your purchases inconspicuous so that you are not tempted to use up your credit and use it within limits.

Use education loans wisely

An education loan is one of the best ways to earn a credit score. Typically, these loans are made to you with a cosigner. One of the advantages of a student loan is that the amount you are granted depends on the financial condition of your guarantor.

To build a healthy credit score, you must pay the loan EMIs on or before the deadline. Education loans have grace periods that are provided to you in case you are unable to repay the loan. However, you should be careful and keep an eye on when this period ends to avoid unnecessary delays in the repayment process, which could affect your credit score.

Avoid co-signing for friends

Helping your friends in need is a kind gesture. However, you should avoid co-signing loans for them as it can be detrimental to your credit score. In cases where the person you signed for doesn’t pay or defaults, your score takes a hit.

This can be very damaging, especially if you are building credit for the first time, as it takes a long time for anything that goes wrong to be corrected. Therefore, it is better to avoid this type of help.

Timely repayment of bills and EMIs

To demonstrate that you are a responsible borrower, paying bills on time is very important. This can positively impact your credit profile and improve your credit score. Missing even one repayment can negatively impact your credit score. Therefore, make sure you keep your refund dates under control and stay ahead of them at all times.

In conclusion, it is a wise step to start your credit journey at an early age. However, what you should keep in mind is that before taking on any financial liability, you should always seek advice from a professional and keep your finances in order and go for a loan only when you really need it. This will not only help you make informed decisions, but also help you lay a strong foundation for your future creditworthiness.