<p>I’m going to be a first-year at college this fall and I’d like to start building my credit. How do I go about doing this? I know that getting a student credit card, putting small things on it, and paying it off every month is a good start but I don’t know much otherwise.</p>
<p>Taking out some loans (and obviously, paying them back on time) will go a long way towards improving your credit score. Also - never <em>ever</em> pay late, even if it’s a $15 charge - I did, not realizing that since there was NOTHING else on my credit score, it dropped it 100 pts. Also, pay more than the minimum (I don’t know if this affects your credit rating, but its an easy trap to fall into, and you end up paying much more than you ever really needed to.)</p>
<p>Make sure you have a credit card, not a debit card. When I looked at my credit report – you can get one per year free from the credit reporting companies – I saw that it lists credit cards, not debit cards.</p>
<p>Luckycharmed is right. NEVER, NEVER, NEVER make a late payment. I really think that a good way to do this is to have a Visa/MC that is from your bank. I transfer funds on-line from my account and never have to put a payment in the mail. Late payments will hurt your credit score AND can make an instantaneous increase in the credit card interest rate.</p>
<p>To start small, you might want to have a bank Visa/MC and one store credit card. The advantage to the store card is that you get advance notice of sales and discount coupons not available to non card holders. That said, don’t take out too many credit cards at once. That sets off a red flag, too.</p>
<p>If you already had to take out loans to fund you education, taking out another loan to establish credit probably isn’t a good choice. But taking out a loan and paying it back on time is another way to build credit. So if you have student loans, pay them on time.</p>
<p>Your credit history is something you build over time.</p>
<p>As for good spending habits – buy ONLY what you can pay for that month, unless there is an emergency. You will end up spending a lot more once you add on interest.</p>
<p>OP: Your plan is good. Lucky’s suggestion of never paying late is good. However, do not pay the minimum. Pay the full amount. Use your credit card only to buy things for which you have money. If you fall in trap of paying the minimum, you risk paying very very high interest rate. My son has a credit card for about 2 years now. He started with very low limit like $1,000. Now his limit is about $5,000 - he must have built up his credit.</p>
<p>Taking out a loan for the purpose of building credit makes no sense to me at all. You take out loans when you NEED to borrow money. Having one or two credit cards, paying them on time and in full every month is the key method.</p>
<p>Save. Saving, per se, will not build your credit. But it is the key to long term financial health. Establish a set % of your income that you will save. And pay yourself first - ie, save right out of the paycheck (auto deposit, for instance, or contributions to a 401(k) ). Do not plan to save “what is left over.” Savings come first. As a college student, you may not have income. But if you do (summer or part-time job), save part of it. Even now. Ideally in an IRA or Roth IRA.</p>
<p>One easy way for lower income people, such as college students, to save is this. Empty your pockets/purse of loose change at the end of each day. Put it in a jar. Bundle it up every so often and deposit in your savings account. This kind of stuff adds up.</p>
<p>Indirectly, saving will lead to better credit. When you have saved you can buy a house. Paying your mortgage on time is a top way to continue building your credit.</p>
<p>Oops! I meant if the OP has student loans, that paying them back on time will increase their credit score, not to just run out and borrow some money just for the heck of it =). Sorry, should have made that clearer!</p>
<p>Do take advantage of perusing your credit report at least once a year. I speak as a veteran of an identity theft. Your name is not unique (ask people on the no-fly list!) and it is very easy for your report to get mixed up with someone else’s. Protect your social security number. Do not carry the card – memorize the number and make certain those people who ask for it have a legitimate reason for doing so. If your school uses it as an id #, petition them to use something else. </p>
<p>Shred all credit card solicitations – esp. those who offer instant credit. Actually, the best thing to do is take yourself off the list for those because it’s easy, so very easy, for somebody to steal one from your mailbox and go to town! Call 1-888-5OPTOUT or visit <a href=“http://www.optoutprescreen.com%5B/url%5D”>www.optoutprescreen.com</a> to stop being deluged.</p>