🎓 How to Build Credit as a Student

What is credit

Credit is the bank’s way of judging if you are a risky investment or not. Credit is measured by multiple private companies taking note of your debt and debt payment history. Credit is used to determine your eligibility for a loan.

Your credit score is a measurement of how risky of a borrower you are. Credit can range from a couple hundred up to 850 and the higher it is the better. A higher credit score means you are more eligible for better loans meaning you can get a better rate and deal when getting a loan from the bank, you can also qualify for larger loans.

Why is it so important to build credit early

As I said earlier, your credit score determines your eligibility for a loan from the bank. Your credit score can determine things like what kind of house you will be able to afford in the future or what business loans you can apply for.

Building credit also takes time. If you start building credit too late you might find yourself trying to buy your first home and not being able to get the right loan.

How do you build credit?

If credit is a way to measure how risky of a borrower you are then the best way to build credit is to prove that you are not a risky borrower. You do this by paying back all debts on time and in full each and every month, never missing a credit card payment, and by making sure all your bills are covered.

Just paying debts on time is not enough though. People will spend their whole lives debt-free and then decide to get a loan and be rejected. This is because you also need credit history. This means you have a long history of paying debts on time and in full. This is often the biggest surprise for people taking out their first loan.

The easiest way to get started with building credit without going into debt is to apply for a credit card. Credit cards are a great tool if you use them right and treat them more like a debit card rather than unlimited money.

Getting your first card can be tough because most cards will require you to show some proof of credit history. The easiest cards to get started with are called secured credit cards. These special types of cards let you start with no credit and no credit history. They do require an upfront payment though, but it is normally refunded after a few months. I have an excellent recommendation for a card that takes no money down in the next section.

There are also special student credit cards for if you are a student, these cards are easier to get, but also are often abused. Remember you have to pay back your credit card every month in full or else you can find yourself in big trouble.

Along with getting a credit card you also need to use it responsibly. To grow your credit most efficiently you need to spend less than 30% of the card balance and pay the card off in full each month. This is definitely the easiest way to build credit and also the least risky.

In the next section, we will go over the best credit cards for those beginning with building credit and the path you want to take if you want to maximize credit card rewards.

Best credit cards for starters

I have recently checked out the Step app for saving and investing and they have a great way for people to start building credit even if you are under 18. You can click here to get $1 by just signing up using my link. You can also start investing and saving money with up to a 5% interest rate all for free.

Other credit cards that are often recommended for beginners are student cards. These are cards you can normally only apply for by being a college or university student. These allow you to get started building credit without needing a secure card.

If you are not a student your options are a little more limited. Your best bet to get started would be to get a secured credit card. As we talked about earlier, for this card you need to put money down that acts as your spending limit for the card, though this money is often returned after a few months.

For specific credit cards, you can check out Nerd Wallet’s recommendations. Here are links to the best student and secured credit cards available.

Best Student Cards

Best Secured Cards

Brokers I use

• Webull Best for more active investing (get up to 75 free shares by depositing over $100)

• M1 Finance Best for more passive investing above $10,000 (get $75 if you invest more than $10,000)

• Charles Schwab Best for custodial accounts (get $100 by investing over $25,000)

• Fundrise Best for buying alternative investments ($25 for signing up and making a $10 deposit)

Other tools

• Yahoo Finance Best for economic news

• Finviz Best for stock analysis and screening

Disclaimer: Most links are affiliates but I 100% endorse and use all of my promotions, we also split the promo reward when you sign up!