By: Ann Redus (UTSA)
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Slowly but surely I’m trying to financially sever myself from my parents. Of course, that’s not what I want to do, but I don’t want the real world to slap me across the face with a reality check when I graduate. So on my journey to ease my way toward financial independence by weaning off Mommy and Daddy’s cash flow, I’ve come across a few speed bumps. One of those speed bumps? My credit- or lack thereof. Consequently, I’ve done some research about how to effectively establish credit. As a student, I know money is hard to come by and a lot of young adults abuse the privilege of having a credit card, but I have found some advice from the brilliant people at Mint.com about building your credit and doing it the RIGHT way so you stay out of debt.
Things to know when trying to create credit:
-Everything you do financially, affects your FICO (credit) score, which in turn affects your ability to take out loans, rent a home or apartment, and even your ability to get a job
-Find a credit card with a low interest rate, not just an introductory interest rate, but a continual low interest rate
-Only write checks if you have the money to. A bounced check affects your credit score
-Look for a credit card with no annual fee
-Applications for credit cards stay on your credit report for TWO years
-Your goal should always pay off your credit card every month. If that’s not an option for you, at least may the minimum payment every month
-Make your payments ON TIME. Not only can you mess up your credit by paying late, but it can also raise your interest rates
-Monitor your credit score frequently. There are free services online to help you deter credit fraud and get an up-to-date credit score
Most credit card companies are weary of letting those with little or no credit open a credit card account, but there are those that are willing to take the risk. I’ve looked into a few credit cards geared toward students who are trying to establish credit.
Capital One Student Rewards Credit Card
No annual fee
Limited or no credit score required
Continual 23.9% APR
Earn 2% cash back on things students buy (phone bills, books, school supplies, restaurants, etc.)
Citi Forward Card for College Students
Rewards its customers for good behavior
0% APR for the first 7 months
Continual 17.24% after 7 months
No annual fee
Earn points for every purchase
Discover Student Card
0% APR for the first 6 months
14.99% APR after 6 months
No annual fee
5% cash back on student-related items (groceries, restaurants, entertainment, etc.)
5% cash back BONUS on certain categories throughout the year
I have a Discover Student Card and LOVE it. I have a credit limit I’m comfortable with, I’m able to pay it off every month, and the cash back bonus has earned me lots of free money! It’s perfect for me.
For more information on how to create and maintain your credit score at a young age, or to find a credit card tailored to your lifestyle be sure to check out Mint.com.