Sunday Reader Question: How College Students Can Build Credit

by on June 24, 2012 · 12 comments

in Credit FAQ, Sunday Reader Questions

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TPG reader Dianna had a great question that sums up one of the challenges facing many young people looking for ways to build their credit without much income:

“I am currently a college student and a world traveler but I do not have all the things necessary to build a credit report. Most articles seem to be for people who have a stable job and consistent income. My income consists of earnings from summer jobs and babysitting during the school year. I was wondering if it is still possible for me to take advantage of using credit cards to earn free traveling points. I do have a credit score from currently holding a credit card and debit card, but have no installment payments or other kinds of credit-building material. I would appreciate any type of advice!”

College students can, and should, begin building their credit, but should take a slow and intelligent approach. Since most college students’ incomes are low, they need to be careful about running up balances, because it can be nearly impossible to dig yourself out of debt once you start accruing. A couple hundred bucks can easily become a couple thousand – and when you are only making a small amount of income, the interest on those balance can start to spiral out of control. There are countless stories of college students getting sucked into huge credit card bills, simply out of poor financial decisions and egregious interest rates (which most college student/intro credit cards have).

However, if you want to get in the miles and points game – you can absolutely leverage your credit as a college student and you can get cards without having a large annual income. Here are a couple tips:

1. Understand how credit works. Educate yourself on the different aspects of credit and how cards work. My simple tip: Don’t run a balance, because the amount you pay in interest will likely negate the value of the rewards you receive. Check out this post for a primer on how credit scores work.

2. If your parents have great credit, you can ask to be added as an additional cardholder on one of their accounts so your credit benefits from their long, positive histories. You don’t even need to use the card – in fact tell them that you don’t want the additional card – simply the positive credit “juice” of being associated with them. For example, if your parents have had an American Express card from before you were born, you can still get that positive history by being an additional cardholder! Check out this post for more info.

3. If you want to start from scratch, get a card that is geared toward new credit applicants or college students. They may not have the absolute best rewards, but if you handle your new found credit responsibly, your chances of getting approved for a premium rewards card will increase drastically. Remember, you should have a long-term strategy in the miles and points game.

For young people just starting out with credit and looking to get some benefits from their cards, I’d most recommend the Chase Freedom card because there’s no annual fee and the points you rack up can later be converted into premium Ultimate Rewards if you end up getting the Chase Sapphire Preferred down the road. That means the points (including the rotating 5x bonus category points) can later be transferred to United, British Airways, Korean, Southwest, Hyatt, Marriott, Priority Club, Ritz-Carlton and Amtrak points. Also, if your parents/friends have a Sapphire Preferred or Ink Bold, you can transfer your Freedom points to them and then they can transfer those points into your frequent flyer/hotel point account. Check out this post, written by a college student contributor, on the top college credit cards out there.

If your credit is already less-than-stellar, don’t get mired down. You can turn things around by getting a secured credit card, like the Capital One Secured Mastercard, and pay it off regularly to start re-building your score.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Bryan

    My daughter started with the discover card for college students. After 6 months she applied for the chase sapphire card hopeing to get the 50k bonus. After a short conversation with chase. The Chase rep let her claim her 529 college plan withdrawals as income and approved her for the card.

  • Grant

    I personally think the citi forward card is a great beginner card becuz you receive 5 points per dollar at restaurants and entertainment. The points can be redeemed for travel, cash back, or just about anything else.

  • Copper07

    If you add someone as a joint applicant, Chase said that if I fill out form and include ssn it would be as a joint account holder and reported to credit bureau. My question is would that affect there chances of being able to later apply for their own card and get a sign up bonus?

  • thepointsguy

    Additional cardholders are still eligible for signup bonuses if they decide to get their own card at some point in the future

  • Jim Williams

    I might add, looking back a long time ago….keep the credit limit low. I know that goes against the “available credit” portion of your credit report. BUT, once one gets out on their own, clothes, dinners, apartments, furniture and so forth can take a $5K limit card to the max QUICKLY. I know the “pay it off monthly” should be the norm, but life happens.

  • Aaronsmith1234

    I’m a current college student, I started a year ago with no credit. I cosigned on a Chase Sapphire card with my mother, and about 6 months after I took her off the card, so it was just me. I’ve also applied for a few other cards and I’ve made all my bill payments on time, and I currently have a score of 750.

  • Ted F

    @Grant. Agreed. I have always said on here that along with Chase Freedom, Citi Forward is the next greatest thing for college kids because of the 5 points all year on dining, movies, and Although it is not one for travel perks, it is certainly one to start for young readers with shallow credit history. But for whatever reason, even though TPG knows that info, he rarely mentions the Forward, even in posts specifically for college students and for people with relatively new credit files.

    @TPG Piggybacking on Amex cards is no longer a sure thing. Amex changed their policy in Nov 2011 and in most cases, the opening date of the additional cardmembers is the current year, so they no longer get primary member’s history. Also, not all additional cardmember accounts (with any bank) show up on credit reports, especially when no SSN was asked/given!

  • I3on

    I got my first debit card when I was around 14 and I think I got my credit card before 18. I think I had to have my parents co-sign or something. My first card was the card before chase slate and I had a $300 credit limit. Luckly for me, my parents where parnoid about using their cards online. So I let them use mine and I would max that card out several times a month. 5 years later I have 6Ok credit lines.

  • Guest

    @TPG Could you please explain in detail how you can transfer your chase freedom points to someone else’s chase sapphire card. I called chase and they said you have to have your own sapphire card to be able to transfer freedom points.

  • thepointsguy -> Manage Ultimate Rewards- Combine points

  • Jamison

    retail store cards are the easiest to get and can open up the doors to VISA/MC/AMEX ;)

  • Pingback: Video SRQ: What is the Best Credit Card for Students Studying Abroad? | The Points Guy()

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