Skip to content

How new college students can acquire and build strong credit

Jan 23, 2019

Building good credit is one of the most important aspects of transitioning from college to adulthood. A high credit score can make it easy to leverage lower rates on future auto and home loans. A credit report may be accessed as part of job screenings, so maintaining solid standing is a positive.

Wise use of a credit card can provide bonuses and rebates on common, everyday purchases like gasoline, or discounts on travel.  But this requires disciplined use of credit and prompt monthly repayment of any bills. So how can students build credit while in college? The simplest way is to get a credit card and start using it responsibly.

How can new college students get a credit card?

Getting a credit card as a college student has evolved since passage of the CARD act in 2009.  Prior to this legislation, it was simple for any eighteen-year old to get a credit card as part of aggressive campus marketing (Free T-shirts and Pizza!) but many students going into irresponsibly high debt became an issue. The CARD act now prevents students that are under 21 from having a credit card unless they have an adult co-signer or can demonstrate sufficient personal income to afford the credit line.

The credit card co-signer option allows the student to gain approval by effectively having a jointly held account with someone with sufficient personal credit and income. The co-signing honors usually go to the parents, but technically anyone could co-sign as long as they meet approval requirements.  The catch is that if the student is unable to pay the debts, the co-signer becomes responsible.

There is also the option of being an authorized user on a parent’s credit card.  In this scenario, the student is added on to a credit card that is under full responsibility of the parent. The student is issued a card with their name on it, but the parent will be seeing transactions on the account as part of their monthly statements. Typically, the family works things out to make sure the balance is covered, like simply giving money to the parents to remunerate for payments.

If the student has steady income from consistent part-time or full-time work, it may be enough to qualify for a credit card in their name only.  Credit card issuers will be required to look at personal income before being able to approve the request.  While job earnings are the most popular source of income, it may be technically possible to be approved using income from investment returns, inheritance or trust fund distributions, unemployment benefits, alimony and child support.

A secured credit card is also is also an option where an upfront security deposit is required before approval. The deposit acts as protection for the cardholder in the event of being unable to make payments.  The deposit may be refunded if the card were later closed or upgraded.  These cards are typically best for users trying to rebuild their credit.

Many major credit card providers now have specific offers designed for first time applicants to help them build credit and today it is easier than ever to compare the options.

Choose the right card

Do some independent research into the features available from different credit card companies.  There are a few key areas that students can address while searching for the best option.

  • How can this card help build credit? Confirm that the card is reporting to all three credit bureaus including Experian, Equifax and Trans-Union. Over time this will help enhance credit-building opportunities.
  • Is there a cost to open the account and are there annual fees? Not all cards have the same fee structures. Many might actually provide no annual fee, but take a closer look at the percentage rate. If consistently paying off the balances each month is no problem, then a higher interest rate card with no fee may be the better option.
  • Are there upgrades to better credit cards? Look into the future with improved credit and consider what new credit cards may be available from the provider after successfully navigating the first card.
  • Know the rewards, points and special offers. Credit cards have gained fame for various special offers for their users, including travel discounts, rebates, cash back on specific purchases, even eligibility for Amazon Prime in some cases. If there are plans for international travel, there are cards that provide easier credit access overseas along with more robust travel points for future trips. For college students, it might be advantageous to have a card that gives cash back on gasoline, grocery and drugstore purchases.  Others provide greater cash back options as the student successfully makes payments on the card, a way of rewarding good credit behavior. Select the card that is most in line with spending behavior and reap the greatest amount of benefits.

There are resources available to take a closer look at special rewards cards.  One of these sites is The Points Guy, which has an extensive series of tips about how to best use credit cards to get free airline miles and hotel stays. It does involve a bit of legwork, but there are lots of free rewards that can be earned through smart about spending strategies.

Complete the application

Completing an application online will require name and address information along with basic financial information like annual earnings and source of income.   When applying with a cosigner, they will need to coordinate to complete their portion of the application.  The nice thing about online applications is that they can collapse geographical restrictions to allow for the cosigner to apply in another part of the country while the student may be on campus elsewhere. Once approved, the card will be mailed out within a few days.

There may also be the option to apply at a bank branch directly. The same financial information would be needed, and it may be helpful to have the cosigning parent there to complete their portion of the application if necessary.   Once approved, it may be possible to have a card generated right at the location, or it may be mailed out just taking a few extra days.

Be advised that sometimes a credit card application may require additional review before it can be approved. The card provider is generally quick to respond to request items like proof of income or bank statements to confirm the application data. Not responding can result in processing delays, so stay aware of the application.

Remember, credit cards are not free money

A credit card is just a small loan with a high interest rate when left unpaid month-to-month. The habit of building good credit is in making affordable purchases that can be quickly paid off.  Realistically, it is simple for credit card debt to grow quickly when making large purchases that require more than one month to pay off.  If students find themselves in this situation, they need to double down on aggressive repayment and prevent using the card for additional purchases until resolved.  Ideally, the full balance is being paid off at the end of every month.

Be smart about credit card usage

Not every little purchase requires a credit card.  Most of the time, a debit card can cover a quick run to the store. However, as mentioned earlier, some cards offer rewards for specific grocery or gasoline purchases, so make sure to use the right card for small purchases to make the bonus offers worthwhile.  Stay on a budget, spend wisely and pay the bill every month.