Why I Decided To Get A Credit Card In College

I would consider myself to be someone who is good with money, so why on earth would I get a credit card in college?

It all boils down to this:

I Have No Credit History

If you’ve been following this blog for a long time, you know that I live with my parents. I save a lot of money by not living on campus, so I don’t regret that decision. I also don’t have any student loans. I get a lot of scholarship and I am lucky enough that my parents pay for the rest of my tuition.

But that also means that in terms of credit, I don’t exist.

I’m like the rest of you. Growing up, I’ve learned to associate credit cards with debt, so I planned on avoiding them at all cost. I’ve read so many stories about people who got into thousands of dollars in debt from their credit cards. I didn’t want to be one of those people.

But recently, I’ve learned about the other side of the story. Many college students are graduating without a credit history at all. So when they go out into the real world, they aren’t able to get a lease for an apartment or able to buy a car at a good interest rate. Some employers also check credit scores during the interview process to see which applicants are more responsible with money.

I didn’t actually realize this until a few months ago. When I turned eighteen, my dad briefly mentioned that I should get a credit card and start building my credit, but we never really talked about it again. I just remember him telling me that the older your credit is, the better.

I didn’t completely forget about this conversation, but I didn’t really think about it for two years. When I turned 20 last November, I felt like I should start getting my financial life together more. Since turning 18, I had saved a good sum of money, but I hadn’t really done much else. I knew about credit scores and Roth IRAs, but those felt more like “Future Triasha” endeavors. Not things I could get into in college.

I started doing a lot more research and realized that it’s completely possible for me to organize my finances more now.

Related – “How Do You Build Credit When You Have No Credit History?” by Dope Dollar

The Process Of Getting A Credit Card

If you’ve read my 2018 goals post, you know that one of my goals this year is to become financially stable. One of the steps for that goal was to get a credit card.

Getting a credit card was a stressful process for me. All the horror stories about credit cards kept popping into my head and shopped around for about a month. My dad told me that I didn’t have to do so much research and to just apply for one, which seemed like terrible advice.

I did look at fancier credit cards with travel rewards and stuff, but the high-interest rates held me back. I ended up getting a Discover Student Credit Card with a 0% interest rate, no annual fee, and forgiveness for the first late payment. It seemed like the best place to start.

Applying for the credit card wasn’t too hard. I typed in my personal information like my social security number and applied. I was approved within a few minutes and got my credit card in the mail about a week later.

After I got the physical card, I set up my Discover account. I learned how to pay my credit card bill online and set up alerts so that I would get notified on my phone. In the last three months of using it, I’ve gained a lot more confidence.

At first, I would make a small purchase on the card (maybe $5 on lunch) and then pay it off within a few days because the thought of having any form of debt caused my heart to pound. I’ve mellowed out quite a bit in the last few months and actually wait a few weeks before paying the bill off because I know that it won’t be counted as a late payment.

Now that I’m less wary of credit cards, I won’t be as nervous about getting my next one and will be more open to rewards options despite their higher interest rates.

Related – “15 Signs Of Financial Stability” by Living Rich With Coupon

What factors affect your credit history? (According To Credit Karma)

Here are some basics about what affects credit history. I’m not an expert, so I will be linking some more in-depth posts at the end.

Payment history – do you have a long history of on-time payments? how many payments have you missed? how much debt do you have? These are the things that your payment history entails. Of course, you can’t expect everyone to be debt free. There is good debt and bad debt. Student loans and mortgages are considered to be good debt, while car loans and credit card debts are considered bad debt,

Credit Usage – You should never use more than 30% of your credit. My credit limit is $1500, so I shouldn’t go over $450 each month. This is more of a guideline than a rule. If necessary, you can use more. Utilizing less than 30% of your credit limit shows that you don’t live beyond your means and don’t regularly max out your credit card.

Length of credit history – The age of your account also helps your credit score. This is why my dad encouraged me to get a credit card so young. After I graduate, I’ll have about two years of credit history. Regularly paying off my credit card every month over the span of two years looks more reliable than getting a credit card after graduating and only using it once.

Credit Mix And Type – This is about the different types of loans you have had like student loans, mortgages, a car, a personal loan from the bank, credit card debt, etc. This isn’t as important as the recent three.

Recent Credit – This is the least important of the five factors. This applies to opening a new line of credit or applying for a loan. Here’s an example. If I were to apply for another credit card now, my credit score would go down. But after paying it off for a month or two, my credit score would be higher than it was before. That’s how Lydia Lois brought her credit score up to 770.

Related – “What Affects Your Credit Score” by Credit Karma

Related – “How To Improve Your Credit Score Within The Next Year” by Gen Twenty

What I Am Currently Doing To Raise My Credit

My credit score is currently 715, which is considered a good credit score (640-720). This is after using a regular credit score for only three months.

Right now, I’m just using the card and paying it off in full. I plan on getting another card soon so that I have multiple lines of credit instead of just one. After checking my credit score on Credit Karma for the first time, it gave me tips on how to get my credit score up. Since I don’t have any debts to pay off, my next step to raise my credit score is to get another card.

I’m also moving out in a few months, so I’m sure regularly paying rent on time will add to my payment history. I only plan on having two credit cards this year. I’ll most likely get a travel rewards credit card sometime in 2019.

For now, the goal is to eventually have four lines of credit at the same time: two with regular fixed payments (like bills) and two for variable payments (like eating out and groceries). There is more information on why in the post I’m linking below. I recommend you read it.

Related – “5 Ways We Went From Zero Credit To A 770 Score” by Lydia Lois

 

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This post was not sponsored by Credit Karma. It’s just the only credit checking site I’ve used so that’s where my source of information has been from. The interface is pretty easy to use, so I recommend it if you’re a newbie like me.

I’ll probably do an updated post in a year once I’ve gotten more experience using a credit card under my belt. I hope this post was interesting to you and has encouraged you to learn more about building credit in college.

I’m not saying that getting a credit card in college is good advice for everyone, but if you are good with money and will pay the bill on time, you should consider getting one.

If you’ve enjoyed this post, here are some other fun personal finance posts for college students:

• 6 Money Habits To Start In College
• How To Create A Budget In College When Still You Live At Home
• 13 Things I Don’t Do To Save Money In College
• 3 Things I Splurge Money On In College
• How Much Money I Spend In A Week (As A College Student)

 

Do you use a credit card in college? Have you used it responsibly or have you started to accumulate debt?