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If you’re wondering how to build credit as a college student, you’re on the right track. After all, your credit score comes into play everywhere from applying for private student loans to filling out an application to rent an apartment. This is because your credit score allows lenders to get an idea of your entire credit history with just one number (kind of like a GPA for your credit).
Credit scores range from poor to excellent. If your credit isn’t where you want it, don’t worry — building your credit might be easier than you think.
4 ways to build credit as a college student
- Become an authorized user
- Get a secured credit card
- Make student loan payments while you’re in school
- Get a credit-builder loan
Having good credit could help you qualify for private student loans, credit cards, personal loans, a mortgage, and more. And if you’re approved, your credit score might be the difference between getting a good rate and the best rate. This means an excellent credit score could save you tens of thousands of dollars over the life of a loan.
Needing a good credit score is one of the biggest differences between federal vs. private loans. Out of all the federal student loan types, only PLUS loans require a credit review.
Learn More: How to Take Out a Student Loan
1. Become an authorized user
The easiest way for many people to get started with credit is to become an authorized user. To become an authorized user, someone you know with a credit card can add you to their account. This means you’ll get your own card to use on the account but aren’t ultimately responsible for the bill.
If you’re an authorized user, the credit card will show up on your credit report. As long as payments are made on time and the balance on the card is low, being an authorized user could help you build a positive credit history and start on the path to a good credit score.
2. Get a secured credit card
While secured credit cards help you build credit just like any other credit card, they work a bit differently behind the scenes. Secured credit cards are designed for people with no credit or bad credit. In some cases, you can open a secured card without a credit check at all. There are also some secured credit cards geared specifically toward students.
When you open a secured credit card, you have to put down a cash deposit equal to your credit limit. If you make the agreed monthly payments, you can get your deposit back if you close the card in the future (or if you convert to an unsecured card).
3. Make student loan payments while you’re in school
Any student loans you have will show up on your credit report, including loans in deferment. But even if you don’t have to start paying on your loans yet, that doesn’t mean you can’t make early payments.
Making payments while in school can be a good idea because:
- You can pay down your balance or accrued interest, which will save you money over time.
- Your payments will show up on your credit report and be counted as on-time payments, which will improve your credit history.
- Paying down your balance and making on-time payments could both improve your credit score.
- You’ll be closer to paying off your student loans for good when you graduate.
Learn More: Student Loan Requirements
4. Get a credit-builder loan
A credit-builder loan is a type of loan for people with no credit or bad credit. With a credit-builder loan, you’ll make a monthly payment that generally will go into a savings account. You’ll also pay interest like you would with any other loan. Once you pay the loan off, you’ll get your money back, minus any interest and fees.
While you’re working to build your score, a cosigner could help
Improving your credit can take time. But if you need to get a loan while you’re building your credit, finding a cosigner might be a good idea. A cosigner essentially shares their good credit with you, making it easier to qualify for a loan. However, keep in mind that a cosigner is also on the hook if you don’t make your loan payments.
If you’re looking to build your credit for a private student loan, you might be able to qualify more easily by applying with a cosigner. Just be sure to consider as many lenders as possible to find the right student loan for you. Credible makes this easy — you can compare multiple lenders at once (with and without a cosigner) in just a few minutes.