How to build credit as a student in 5 easy steps

Students sitting on library steps and talking about how to build credit Students sitting on library steps and talking about how to build credit Image:

In a Nutshell

Still in school but ready to start building your credit? You can work on establishing a positive credit history with student loans, rent payments or an application for your very first credit card.

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At a glance: Some of our favorite credit cards for students

Journey℠ Student Rewards from Capital One® Designed for students, which may make it easier to get approval with little to no credit history. Teens will still need to show proof of their own income, or a parent can co-sign.
Capital One® Secured Mastercard® You’ll get an initial $200 credit line after making a security deposit of $49, $99 or $200, (the amount is based on your creditworthiness).
Discover it® Chrome Student Credit Card  You’ll get $20 cash back each school year your GPA is 3.0 or higher for up to the next 5 years.

If you’re a college student eager to start building a positive credit history, you may have a few options to consider.

But first things first: How old are you? People under 21 can legally open a line of credit, but you’ll probably need a co-signer or proof of income to open a credit card. You may be able to apply and qualify on your own if you have income from a job, but this isn’t the case for a lot of students.

Your specific game plan may depend on your age and whether you have a parent or guardian willing to co-sign a credit card with you or add you as an authorized user. With that in mind, you may not find it necessary or possible to follow all of the following steps, but we think they’re a solid blueprint to get the ball rolling on a lifetime of excellent credit.


How to build credit as a student in 5 easy steps

1. Consider whether you need student loans

If you need financial aid to complete your undergraduate degree, you may want to look into federal student loans.

Many students and young people encounter a frustrating credit conundrum: It can be difficult to qualify for the best private loans or credit cards  with little to no credit history. But how does one build a credit history without those loans and credit cards?

One way to start is with a federal student loan. While private student loans may require an established credit history, most  federal student loans don’t require a credit check . That means you can borrow the money you need to pay for school and build your credit by paying back those loans responsibly and on time.

2. Become an authorized user on a family member’s credit card

Being an authorized user means you can use someone else’s credit card in your name. You can make purchases and use the card as if it were your own, but paying the charges legally remains the primary cardholder’s responsibility.  The primary cardholder — your parent, for example — can make you an authorized user by adding your name to their credit card account, and it can be a great way for you to start building credit.

Why? Because most (but not all) credit card issuers report account activity to an authorized user’s credit reports. This can help you build credit if both you and the primary cardholder manage your cards responsibly.

“When I was 16, my grandmother added me as an authorized user on one of her credit cards,” says Leanne Ross, founder and CEO of Ivy Ladder, an online career resource for students. “She thought this was a great way to start to build my credit from a young age.”

Grandmother usually knows best. Still , be aware that if the primary cardholder misses a payment or starts carrying a large balance, this can actually negatively impact your own credit.

3. Get your own credit card

Once you’re able to open a credit card in your name, this will be another way to build your credit history.

Ross says this is what she did in college — and she always paid off the card balance in full each month. “I didn’t want to use the card as a way to spend money that I didn’t have,” she explains.

Secured credit cards, like Capital One® Secured Mastercard®, offer a potentially appealing option if you’re looking to build credit for the first time. To use one, you’ll need to make a security deposit, which then becomes your initial credit line. With Capital One® Secured Mastercard®, for example, you’ll get an initial $200 credit line after making a deposit of $49, $99 or $200, (the amount is based on your creditworthiness).

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These types of cards can help you learn to manage credit responsibly, since you spend more than your secured card deposit. Just make sure the issuer reports your activity to the credit bureaus so you can start building a credit history.

4. Practice good credit habits

Once you open your first line of credit — whether it’s a credit card or a student loan — you’ll want to manage that credit wisely.

Knowing how credit scores work can help you make smart financial decisions. Here are a couple of quick tips to keep in mind:

  • Pay off your balance on time and in full. Paying what you owe on time and in full shows lenders that you’re reliable and will pay off your debts. It’s often a significant factor in determining your credit scores.
  • Avoid opening multiple accounts at once. Your “new credit” may influence another portion of your credit. People with short credit histories who rack up lots of new accounts in a short period of time might be seen as riskier borrowers than those with long histories and fewer accounts.

5. Get credit for your rent payments

Paying your rent on time isn’t always reflected on your credit, but you might be able to change that. Several services will help ensure your positive rent payment history is reported, which can help you build credit even without a credit card or loan. eRentPayment, for example, reports to all three major credit bureaus — Experian®, Equifax® and TransUnion®.

The service does cost a small fee (eRentPayment charges $3 per transaction or $10 per month) and your landlord must be registered for you to be able to use it. If you have always paid your rent on time and your lease is in your name, it may be worth trying to get it reported on your credit.


Bottom line

The sooner you start building your credit, the longer credit history you’ll have — and that may translate to healthier credit. You can start building credit by repaying your student loans or by signing on as an authorized user on a family member’s credit card.

If you earn your own income, you can also apply for your own secured credit card to help you get started. Just make sure to practice smart credit habits, like charging only what you can afford and paying your monthly balance on time and in full.


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