Major milestones like going to college can come with major price tags, leading many parents and students to take a hard look at their finances. There’s no better time for a financial checkup than when you’re preparing to pay for your child’s, or your own, college education.
One area of your personal finances that definitely deserves some attention is your credit. A good credit score unlocks the door to future financing options and better rates.
As a college student, you probably have some work to do to build your credit to begin with. As a parent, maybe you’re battling a low credit score or want to keep up the solid history you’ve built.
Either way, here are a few surefire strategies to boost, and maintain, your credit score.
Top 7 Tips to Build and Maintain Good Credit for College Students and Parents
1. Understand the Basics
Before you can effectively strategize ways to maintain good credit, you have to build it. To build it, you need to know what a credit score encompasses. Here’s the breakdown of a typical credit score:
- Payment history: 35% of your score looks at your history of made and missed payments to predict how you’ll deal with credit in the future.
- Credit utilization: 30% of your score assesses how close you come to maxing out your credit limits.
- Length of credit history: 15% of your score goes to the length of time your accounts have been opened and how long it’s been since you’ve interacted with them.
- Credit variety: 10% of your score reflects the versatility of your credit sources to assess your risk.
- New credit: The final 10% of your score, as the name suggests, looks at all things new credit, like credit inquiries and applications and new accounts.
2. Make Payments on Time, No Matter What
This is one of the best pieces of advice to maintain a solid credit score. The most crucial part (35%) of your score is determined by whether or not you make your payments on time.
If you’re a procrastinator, struggle to keep up with due dates, or just want added peace of mind, you can easily set up automated payments with your credit sources.
Doing so will save you time each month and ensure that your payments help your credit, not hurt it.
3. Use Credit Cards Wisely
How you utilize credit cards can have a dramatic impact on your credit score. To make that impact a positive one, here are a few good rules to keep in mind:
- Don’t close out old cards: Keeping your card open can lengthen your credit history. Close the card out, and it will eventually be removed from your credit score, negating your faithful payments. Closing cards also limits your available credit.
- Keep your balance low: Try to keep your credit utilization balance at 30% or less to maximize the impact on your credit score.
- Partner with parents: If you’re a student, you can build your credit by getting a joint account with your parents. It holds you accountable and teaches you how to use credit.
- Make everyday purchases: Don’t make insane purchases with your credit card. Instead, work it into your budget for routine costs like groceries, gas, or your phone bill.
- Consider a balance transfer card: Consolidating your credit card balances can help you pay them off quickly and boost your score, streamlining your monthly payments.
4. Keep Your Rate Shopping and Credit Applications to a Minimum
Every time you apply for a loan or new credit, you invite a hard credit check, which can be detrimental to your credit score.
Before you start shopping for rates, do your research. There’s no point in applying if you don’t meet the minimum requirements for approval.
When you’re ready to start shopping, knock out all of your applications quickly. Applications for the same type of funding, like an auto loan or a mortgage, made within a couple of weeks of each other will typically only count as one hard inquiry.
5. Monitor Your Credit
To track the results of your efforts to improve your score, you need access to it.
Services like Credit Karma and Credit Sesame offer free credit reporting and notify you of changes to your score. You can also request a free copy of your credit report every 12 months through annualcreditreport.com.
As you work to build and maintain your credit, pay close attention to drastic changes in your score. Mistakes happen, and so does identify theft. Staying on top of your credit report can help you catch issues and fix them quickly.
6. Boost Your Credit Score with Apps
There are tons of apps on the market created to help your finances thrive. From budgeting apps which help you decide how to utilize your credit and spend within your limits to apps that help you automate your payments, these platforms can play a key role in bettering your score.
A personal finance app like Mint can do it all, categorizing your spending to help you see where your dollars are going and remind you to pay your bills.
If you want to take it a step further, you should check out Experian Boost. Boost factors in your utility bills, which don’t usually play into credit scores, to help increase your score instantly.
You use apps for everything else, why not use them to maximize your credit score?
7. Be Smart with Student Loans
Student loans can have a heavy impact on your credit score, especially if you’re a new graduate without much credit history to stand on elsewhere.
These loans, which are usually paid back in installments, can hurt your score if you repay them late. And the longer those accounts are delinquent, the more they can affect your score.
To avoid delinquency and use your student loan payments to help, rather than harm, your score, here are a few pieces of advice:
- Take out reasonable loan amounts: While the idea of extra cash while you’re in school might sound like a good idea now, it might not when you’re starting your career out saddled with debt. Borrow wisely and get just the amount you need to cover your educational expenses.
- Consider all your repayment options: With federal loans, you may be able to lower your payments with an income-driven repayment plan, making your monthly payments more feasible. Also: consider making small payments on your student loans while in school. By making small payments now, you will save overall on the cost of the loan.
- Request a forbearance: If you’re struggling to make your payments, you can consider requesting a forbearance or deferment. You’ll be granted a window of time to get your affairs in order to make timely payments in the future. Keep in mind, your loans might still accrue interest during this time.
- Know the terms: With a private student loan, make sure you understand the terms of your repayment, like whether or not your interest rates are fixed and when you’ll need to start making payments.
Bottom Line
Don’t let bad credit get in the way of financing your future dreams.
As you or your child set out to attend college, you’ll be faced with a world of credit and lending opportunities.
Make sure you’re utilizing them in a way that strengthens your credit score.
With the advice here, you can build a strong credit score and keep it that way, unlocking awesome rates and financing sources and setting yourself up from success.
Get started today. Your future self will thank you.
