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For those entering their final year of college or on the cusp of graduation, your life is about to change drastically. Soon the days of textbooks and note-taking (unless, of course, you continue on with your education) will be in the past, with the workforce right around the corner. Will you be ready?
One thing to consider as you prepare for the working world is to start building your credit history using a credit card. Demonstrating a strong credit history is important if you want to move into your own place, buy a new car, or refinance your student loans. And while these goals don’t have to be achieved immediately following graduation, it’s helpful to put yourself in the best possible position when that time comes. That way you aren’t left with a higher interest rate on your new car or denied a rental application for an apartment by a landlord if your credit history doesn’t suggest you can keep up with monthly rent payments.
Learn how opening a credit card now can help build your credit as you transition to the next phase of your life.
Now that you’ve recognized you want to build your credit history, it’s time to take the next step: open your own credit card or become an authorized user on a parent or guardian’s card.
By signing up for your own credit card, you carry all the responsibility of the card, including making payments on time and keeping spending in check. Be sure to choose the card that’s right for you. For example, you’ll likely want to avoid a card with an annual fee if you don’t anticipate any rewards greatly exceeding the cost of the fee.
If you’re unable to open an unsecured credit card, consider looking into a secured credit card, which allows you to make a deposit in exchange for a line of credit. (Be careful of any potential fees.)
You may not be ready to have your own credit card but still want to establish credit. In that case, you could ask a parent or guardian about becoming an authorized user on their credit card. When the primary cardholder — in this case, your parent or guardian — adds you as an authorized user, you’re able to make transactions and pay off your balance just as if it was your own card. The primary cardholder can monitor your activity on the account so you don’t overspend.
Note: Your credit will be positively or negatively impacted based on the credit habits of you and your parent or guardian, so be sure to confirm that the primary cardholder demonstrates proper practices before becoming an authorized user.
A major reason for getting a credit card in the first place was to build your credit score, right? With that in mind, make sure you adopt proper credit practices yourself to turn your card into a credit-improving asset.
To start out, consider limiting your use of your credit card. Choose one regular expense to charge to ensure your spending does not waver from what you can afford to pay back. For example, you can use your card for only gas, groceries, or any monthly subscriptions. That way you’re using your card every month and your statements will fit into your budget so you don’t accrue any interest by failing to pay off your balance. As you become more comfortable with making payments, you can start to charge more.
While your credit score won’t be positively impacted overnight, be sure to check your credit score to see what progress you’re making. You are entitled to one free credit report each year from the three credit-reporting bureaus, which include in-depth examinations of your entire credit activity. Additionally, some credit cards provide regular updates to your credit score so you’re able to monitor your progress.
Not sure how your credit score is calculated? There are five factors that impact credit, which you can learn more about here.
Building your credit is a beneficial task for post-graduation life. It carries major implications on your ability to live out the life you want, whether it’s the independence of having your own living space or signing on the dotted line for your new car. By using proper credit practices now as college comes to a close, you can better position yourself to have the life you want after donning your cap and gown.
We are committed to helping you reach your potential by providing personalized solutions. Our dedicated colleagues can help you find the right product to help you reach your goals. To learn more about opening a credit card, please call 1-888-333-5145, visit us online, or visit your nearest Citizens Bank branch.
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