Financial credit is not just something to be concerned about in or for the future. It can impact university students right now and is worth consideration at this point in their lives. Students’ credit scores are linked to options and decisions more than students might realize.
As a BYU-Idaho student, there are multiple things you can do and choices you can make to preserve and boost your credit score so you're starting off on the right foot for a successful future.
Credit Score Basics
Basically, a credit score is a number that shows how you handle borrowed money. And there are two types of credit scores you'll likely hear: FICO and VantageScore. Both use slightly different systems, but both look at how you use credit: whether you pay on time or max out accounts, etc. These numbers help portray patterns in your financial behaviors.
But what influences your credit score, really?
Payment history
This is an important one. Paying bills on time helps your score; missing payments hurts it. It's as simple as that. Even minor late payments are noticed and have an impact.
Credit utilization
This is how much of your available credit you are using. For example, if your limit is $500 and you've used $450, this looks risky to lenders. But if you've only used $100, this looks better.
Length of credit history
This one looks at how long your accounts have been open. A longer history means more information lenders can see to make financial decisions. This is why starting a financial history early matters.
Credit mix
Your credit mix is the type of accounts you have (i.e., credit cards and loans). This isn't as impactful on your credit scores as other indicators, but it still affects your scores.
New credit inquiries
Every application individuals make for new credit appears on their reports. Applying for several accounts in a short amount of time can actually lower your score, especially if those applications are declined.
Why a Solid Credit Score Matters
Your credit score impacts more areas of your life than you might realize.
Landlords often use credit checks before approving apartment leases, and if your credit is limited or poor, they may ask for a higher deposit. The same applies to utility and phone companies, as well as getting a car on finance. A limited history or poor financial behaviors lead to more unfavorable lending terms and criteria.
Students who start building credit while in school often have an easier time later. They learn what habits build a credit score, and they're not starting from nothing after graduation.
Habits That Help Your Credit
The good news is, you don't need to make big financial moves to build credit. For the most part, it's the everyday habits you put into practice that help.
Pay on time — every time
Late payments can stay on your credit report for years. Even one missed payment can impact you years down the line and cause problems.
Keep balances low
As mentioned, using most of your credit is risky. The best approach is to use as little as possible and always pay it off where you can to keep it low.
Avoid overdrafts or bounced payments
Overdraft fees can add up fast and cause damage immediately if you get into trouble. Returned payments also impact your credit report and harm relationships with banks.
Monitor credit regularly
You can use free tools to help you check your credit. This can help you catch issues early.
Tools and Resources for Students
There are various free platforms you can use, such as Credit Karma and NerdWallet, to check your credit score and see what is affecting you. Plus, they explain things easily so you're not inundated with financial jargon.
You can also use budgeting apps such as Mint and YNAB to track spending and help you balance bills like rent, groceries, utilities, etc. You may also want to check out financial literacy workshops or counseling through Federal Student Aid to help you make smarter money decisions.
Building Credit Without Going into Debt
The key is to use credit responsibly. You need to use credit like a tool, not a free ATM.
Ways to Start Building Credit as a Student
As a student, you'll likely be starting from scratch, and these tips can help you build solid credit.
Secured credit card
A secured credit card needs a deposit. This deposit becomes your credit limit. For example, if you put $500 down as a deposit, your limit will be $500. Approval is easier because the bank has your deposit, and when used responsibly, a secured credit card can help you build credit.
Becoming an authorized user
Being included as an authorized user on a credit card account for someone who has a positive credit history—such as your parents—can help you build credit.
Credit builder loan
Credit builder loans are small loans to help you build credit. The money goes into a locked account, and you make monthly payments. When it's paid off in full, you receive the funds. This gives you a record of making on-time payments.
How Rent Payments Can Build Credit
Some services report rent payments to credit bureaus, and if you pay monthly on time, this can help boost your credit.
Recognize that rent payments are not always reported to credit agencies by property owners. However, rent reporting services work by verifying your payments and sending this information to the credit bureaus. And over time, consistent rent payments could help your credit.
As you're already paying rent, your payments are an excellent way to build credit without taking on any additional debt.
Supporting Financial Health with Affordable BYU-I Housing
Credit is only one part of your finances; your housing choices matter too. This is because rent is often the biggest expense students handle. And if rent is too high, everything else becomes harder to manage.
Affordable BYU-I housing helps keep finances more balanced, and manageable rent can equate to more money for groceries, transportation, and other purchases, meaning you're not relying too heavily on credit cards to make up any shortfall.
Students who are looking for affordable BYU-I housing options are welcome to contact American Avenue to learn about our rates, apartment options, and availability.