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Being a college student is no easy task. Between classes, internships, part-time jobs and extracurricular activities, there are so many things to juggle — not to mention having fun. Another important thing to do during college, which people might overlook: building credit.
Here at TPG, we often discuss how grabbing a particular credit card’s sign-up bonus can quickly unlock award travel. However, in order to open those cards, you’ll need to have an established history of using credit responsibly. Fortunately, college is one of the best times to establish a clean credit profile, and even earn some points or cash back to use for travel.
Your Financial Future: Building a Credit Profile
Just about every adult in the United States with a Social Security number has a credit profile — a history of one’s past borrowing and payments, which is often summarized in an overall credit score. Banks use this to determine how trustworthy you are and how much of a risk they’re taking when they issue you a credit card or other loan.
Beyond credit card issuers, though, other parties check your credit profile to make sure you’re a responsible person. This includes the obvious, like mortgage lenders and auto loan providers, but also landlords when you apply to rent an apartment, cell phone companies when you sign up for a new line and utility companies when you activate electricity, gas or cable for your apartment.
That’s why it’s important to have built some amount of credit history by the time you graduate college. Say you move to a new city for a job after graduation and want to find an apartment — your credit will be checked at least two or three times. If your profile is empty, then you might be required to pay a much larger deposit, or may even see your application denied by the landlord.
Ask a Parent to Add You to Their Account
Your credit profile is essentially the history of how you’ve used (or held, or interacted with) credit, and while you need some kind of past credit activity in order for lenders to give you access to credit, you also need to have access to credit in order to build that history. It’s a bit of a conundrum, and when you’re just 18 or 19, you may not have much or any past activity.
One exception is people who have taken out student loans. While that kind of debt may not be fun to have, one upside is that they actually count as part of your credit profile, even before you enter the repayment period.
Whether or not you have student loans, another great way to start building your credit history is to “borrow” someone else’s by asking one of your parents or guardians to add you to one of their cards as an “authorized user.” That means that you’ll have a card with your name on it, but it’ll be connected to their account, so they’re responsible for paying for any charges you make.
Even if you don’t make a single charge, though, it can be worthwhile; most credit card issuers will report to the credit bureaus that you’ve been added to someone else’s account, and that will actually count toward your profile. For example, when I left for college my mom added me as an authorized user on her American Express charge card, just in case of any emergencies that I didn’t have the cash to cover. By the time I graduated, I had more than four years of healthy activity on my credit report from that single account.
The important caveat here is that you can get the good and the bad associated with the account you’re added to. If the main account holder has negative marks on the card in question, such as late payments or a current high balance, that could hurt your overall credit score.
Open Your First Credit Card
Since most college students spend at least a little money every week, having a credit card is the best way to rack up valuable rewards — and a great way to start building credit. You can apply for your own credit card as soon as you turn 18, and there are plenty of starter cards for college students out there that are well within reach for college students with limited income.
You’re still figuring out your personal spending habits and learning financial discipline. Because people tend to spend more money overall when they pay with credit cards compared to cash, it’s important to learn how to use a credit card responsibly and only spend money that you would be spending anyway.
The best way to do that is by opening your first credit card so that you can get used to spending on the card, as well as paying it off, on time and regularly, to avoid interest charges, late fees and negative points on your credit profile. Your credit score will also benefit from having your own account listed, which you’ve been using, as opposed to just an authorized user account.
Before diving too far into the rewards game and considering travel cards like the Chase Sapphire Preferred Card, you may want to open a student credit card. Cards like the Discover it® Student chrome offer cash back on purchases, and even an extra bonus for high grades. It’s also easier for new users to be approved for a student credit card than many other cards.
You may also be able to get a student credit card, or even a regular card, through your normal bank. There are scattered reports of individuals with Chase student checking accounts but little income being pre-approved for cards like the Chase Freedom. Wells Fargo offers a compelling product with the Wells Fargo Cash Back CollegeSM Card, which is most easily available to checking account holders, so be sure to check with your banker.
The information for the Wells Fargo Cash Back College Card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
If you have absolutely no credit history or income, you still have options — look into secured credit cards, which are designed for people in this exact situation. When you open a secured card, the issuer takes a cash deposit and then offers you a credit line equal to your deposit. That way, there’s no risk to the bank. If you don’t pay off charges on time or at all, the card issuer can just keep some or all of your deposit — while reporting the negative data to the credit bureaus. As long as you pay off the card on time, you avoid interest and build a positive credit history. You may even be able to earn cash back on what you spend with options like the Discover it® Secured.
After a year or so of having a student or secured card, you can try applying for something more rewarding. Remember, though, to keep watching your spending!
Also keep in mind that you’ll have to have some kind of regular income — besides disbursements of student loans — in order to get your own card. This can include income from part-time or summer jobs, plus regular cash allowances from your parents.
Don’t Forget: Sign up for Frequent Flyer Programs
Despite what some people say, you don’t need to be a regular traveler to belong to frequent flyer or hotel loyalty programs. All you need to do is make an account for whichever airline or hotel chain you plan on staying at and you’ll earn points or miles just for showing up for your paid reservation. There’s also no limit to how many loyalty programs you can be a part of.
While there are merits to diversifying your points holdings, you don’t want to spread yourself too thin. Most US flyers I know will link their Delta SkyMiles number anytime they fly with a SkyTeam alliance airline member, their United MileagePlus number anytime they fly a Star Alliance partner, their American AAdvantage number on Oneworld flights and so on.
When you create an account with any loyalty program, you’ll also have the chance to save your personal information — like your passport number or Global Entry number — to make booking easier in the future.
Make sure you use your loyalty program numbers anytime you fly or stay anywhere. Whether it’s a family vacation, a flight home or a sponsored trip through your university, you can earn miles if you link your loyalty number.
Credit card spend and flying aren’t the only ways to earn points and miles. When you create an account with a loyalty program, take a second to sign up on its shopping portal. Then the next time you shop online, take a second to check and see if you can earn points and miles with said loyalty program by shopping through their portal. The sites will look exactly the same and you’ll be able to shop as you normally do, but you can earn upwards of 10 miles per dollar spent on a purchase you were already planning to make!
Similar to online shopping portals, you can link your credit cards to a specific loyalty program’s dining program and earn points when you eat at certain restaurants. Most cities have tons of restaurants that participate, and the list can even help you narrow down where to go to dinner if you’re feeling indecisive. Combine this tactic with putting your card down while people pay you back you for their food and you’ll rack up points and miles even quicker.
College is the perfect time to get started with credit cards, points and miles. Not only will you be able to accrue hundreds of dollars worth of valuable points and/or cash back, but you’ll also set yourself up perfectly for post-college life where having a good credit score and knowledge of credit can help you get approved for apartment leases and loans.
It may seem daunting at first, but once you put in a little time and effort to get a card and sign up for loyalty programs, it’s easy to see why it’s all worth it. A good credit score and loads of points and miles can take you places that your debit card could never dream of.
When considering points, miles and your credit health, just remember to always spend within your means and to pay off your accounts in full every month to avoid interest and negative marks on your credit profile.
Featured photo by @basakt via Twenty20
Additional reporting by Sam Lipscomb.
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