Building credit as a college student?

Kwesi · #1 09-14-2011, 05:48 PM

I have my thread about possibly getting a credit card or not and I think I've got the info to make a good decision about whether I should get one or not and which I should get if I do.

My question now is, how can I, as an unemployed college student, build credit? Someone in the other thread suggested having my parents put my name on the mortgage. Is that good advice? Is there anything else you guys can suggest? Just wondering, thanks.

RosieB · #2 09-14-2011, 08:22 PM

Not so sure the mortgage thing is a good idea. Yes, it will help you build credit, but if you need a loan or anything you will have some major debt counting against you. And what if something unexpected happens and they default on the loan? That would have the opposite effect of what you're trying to do.

I'd just get a credit card, use it for stuff you'd buy anyway, and then pay it off every month. If you really want something else to build credit, see if your parents will co-sign financing for something you might be buying. Or that they might be buying. TV, furniture? Doesn't have to be anything overly high priced, just has to be paid regularly and on time. And nothing so high that it would be detrimental to you if something unexpected happened.

Good idea starting on this now, before you actually need it.

fdeck · #3 09-14-2011, 08:33 PM

This seemed interesting.

Raise your credit score to 740 - 1 - FICO basics - MSN Money

It suggests that you don't have to go into debt in order to build credit. But if you get a credit card or loan, you need to make sure that the provider reports to the major credit rating agencies.

If you're going to college, then you've got plenty of time. I don't think it's worth paying a monthly service fee, plus interest, for four years in the hope that doing so will give you a superb credit rating.

Also, now's the time to read a book on personal finance. Who knows, you might find it interesting. If you find finance interesting, then you're headed for great things.

MakiSupaStar · #4 09-14-2011, 08:45 PM

The credit card companies like to instill this false sense of urgency in you that it's important to have a credit score and all that, but don't get sucked into that noise. Why are you so concerned about it?

fdeck · #5 09-14-2011, 08:53 PM

Quote:

Originally Posted by MakiSupaStar

The credit card companies like to instill this false sense of urgency in you that it's important to have a credit score and all that, but don't get sucked into that noise. Why are you so concerned about it?

Words of wisdom. Especially since getting sucked into that noise raises your risk of getting a bad credit score rather than a good one.

jive1 · #6 09-15-2011, 12:33 AM

The credit score is only a part of the equation for some loans and interest rates. Your income and assets will be taken into account for large loans. If the goal is to get a loan someday, get a job and obtain some investments and/or durable goods. It may not directly help your credit score, but it will actually help you pay off the debt if you get into it.

If you are hell-bent on the credit card route, get one and don't use it. Or just use it at Jive Sound. Available credit is part of your credit score. I was advised not to cancel a couple of my empty balance cards because it would reduce my available credit, and reduce my score. See what a friggin game this is?

jive1 · #7 09-15-2011, 12:35 AM

Quote:

Originally Posted by RosieB

Not so sure the mortgage thing is a good idea. Yes, it will help you build credit, but if you need a loan or anything you will have some major debt counting against you. And what if something unexpected happens and they default on the loan? That would have the opposite effect of what you're trying to do.

If there is equity in the house, then the house can make for collateral, thus improving your chances for getting certain loans. But it really, really, depends on the parents and the kid. Someone can get really screwed if it's abused.

rockstarbassist · #8 09-15-2011, 10:57 AM

If you don't want to get a CC, go to Best Buy or GC and buy something on payments. I don't think you have to be offered an actual "card" for this. The whole deal is a racket, and you only need worry about it TBH if you're looking to get into a mortgage in a year or two. Your interest rate on an auto isn't as big of a deal on that and will way more depend on what car and brand you're buying and if you finance through the dealership or get a loan from a C.U. or bank, etc..

However it's gotten out of hand and with everyone so quick to max you out at the 29.99% rate for one late payment just get one and be done with it. I switched banks to Citi from BoA and I closed both of my BoA cards. It does reduce your "available to borrow" but again, that's only one small factor.

Passinwind · #9 09-15-2011, 11:22 AM

Quote:

Originally Posted by jive1

get a job

/thread

macaroni tony · #10 09-15-2011, 11:35 AM

Quote:

Originally Posted by MakiSupaStar

The credit card companies like to instill this false sense of urgency in you that it's important to have a credit score and all that, but don't get sucked into that noise. Why are you so concerned about it?

This. You don't need to build a credit score right now. Worry about school. Like Daren said, the CC companies like to prey on college kids because they don't know any better than to get a credit card and charge a bunch of stuff on it. College students are an easy sell.

Cell phone, maybe a car, that's about all you need right about now.

Tmw2011 · #11 09-15-2011, 12:24 PM

Quote:

Originally Posted by fdeck

This seemed interesting.

Raise your credit score to 740 - 1 - FICO basics - MSN Money

It suggests that you don't have to go into debt in order to build credit. But if you get a credit card or loan, you need to make sure that the provider reports to the major credit rating agencies.

If you're going to college, then you've got plenty of time. I don't think it's worth paying a monthly service fee, plus interest, for four years in the hope that doing so will give you a superb credit rating.

Also, now's the time to read a book on personal finance. Who knows, you might find it interesting. If you find finance interesting, then you're headed for great things.

As someone who's been recently spending their time and effort to remove themselves from the nightmare of credit hell, this article has a lot of good information if you can keep yourself on the straight and narrow.

If you're going to have a credit card, it's actually better to have 2 (or three) and keep the balances low on all of them, using them sparingly (but still using them) and paying off the balances fairly frequently to keep yourself at about 10%usage or below of your available credit.

And don't go hog wild for applying for credit. The hard dings on your credit seem to affect things a little more than the article relates in my experience, especially when there's a buttload of them on there. Luckily, those fall off of their own accord in 'only' two years. If you decide to go for a mortgage at some point when you've got your decent credit score and are shopping around for the best rates, try and give yourself a two year window before going after other things that involve credit examination, like a car. You'll likely shop around and have a bunch of of companys dinging your report to decide what rates you can get. Even with good credit, in my experience, this *does* make creditors feel a little iffy when they see a slew of these on your account.

While in part, I agree with those who say 'You're in college, don't worry about it for now' I also know that life has it's many twists and turns and you never know when you might need to have a good credit score available to get yourself out of a situation that comes out of the blue.