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When you’re pursuing higher education, you tend to have a lot of expenses. Plus, you’re usually busy and don’t have the time to deal with withdrawing or using cash, especially since much of life happens online these days.
Further still, by investing in your future through attending college, you already have a goal-oriented mindset.
You want to prepare when you eventually look to get approved for a mortgage or need a reasonable insurance rate.
However, getting there won’t happen overnight as building credit is a long journey and anything but a destination.
Credit cards are a valuable tool for students looking to tap into credit for the first time. But how do you get a credit card if you have no credit? Which are the best cards for students?
We’ll go over the top card choices for students who want credit cards, how student credit cards work, how to best use them to your advantage, and more below.
Best Credit Cards for Students with No Credit
1. Petal® 2 “Cash Back, No Fees” Visa Cash Rewards Credit Card – Annual Fee: $0
The Petal 2 “Cash Back, No Fees” Visa starter credit card wants to take to heart people’s thoughts on it being time for a card company to help people succeed financially.
To heed this call, Petal has used modern technology to design credit card products that help you budget, control your spending, and build credit.
This card is best for those with thin to no credit files because Petal accepts applicants based on cash flow underwriting alone—meaning no credit history is required.
And if you have a credit score, you can get the opportunity for acceptance with a fair credit rating, meaning you need a minimum credit score of 600 or better. If you have a credit score of 720 or better, Petal auto-approves your application.
This credit card issuer reports your payment history to all 3 major credit bureaus, helping you build credit.
With credit limits as low as $500 and a higher credit line up to $10,000, 2% – 10% cash back at select merchants and up to 1.5% cashback on eligible purchases after making 12 on-time monthly payments, Petal 2 might be an excellent choice to consider as a beginner credit card.
This credit card charges no fees whatsoever, letting you avoid simply holding the card in your wallet.
2. Petal® 1 “No Annual Fee” Visa Credit Card
Like the first Petal starter credit card above, this alternative uses modern technology to design credit card products that help you budget, control your spending, and build credit.
And if you have a credit score, you can get the opportunity for acceptance with a low to a fair credit rating of 550 or better. If you have a credit score of 720 or better, Petal auto-approves your application.
3. Secured Sable ONE Credit Card
The Secured Sable ONE Credit Card is a secured credit card is specifically for consumers looking to start or rebuild their credit.
There is no credit check when applying for the card; therefore, applying does not hurt your credit score.
A secured card is different from a traditional credit card because you make a deposit. Then, you spend using your card and make payments on your purchases.
Once you’ve proven you are responsible enough to make on-time payments (whether you pay the minimum or the full amount) you can get your deposit back in as little as 4 months.
At that point, your Sable credit card could turn into a normal credit card, with no deposit required.
This secured credit card is also unique because it also offers 2% cash back at many different stores, something most secured cards don’t do.
You also get to decide how much of a deposit to make. There is no minimum deposit requirement.
Additionally, Sable comes with a user-friendly app that keeps you motivated by showing you milestones. They’ll even celebrate you when you “graduate” and get your deposit back.
4. Deserve® EDU Mastercard for Students – Annual Fee: $0
The Deserve EDU Mastercard for Students is an award-winning student credit card for all students—both from the U.S. and visiting from abroad. For international students, you do not need a SSN to apply.
The Deserve EDU starter credit card is a non-conventional option that acts as neither a secure credit card nor a sub-prime card. This card works well for international college students who lack a Social Security Number.
For signing up, you can receive one year of Amazon Prime Student after making $500 of purchases in the first three billing cycles (Lifetime Value of $59).
Likewise, you can also earn 1% cashback on all purchases, receive cell phone protection of up to $600 and not have international transaction fees on purchases abroad.
5. Chase Freedom® Student Credit Card – Annual Fee: $0
The Chase Freedom® Student Credit Card serves as the entry-level option in the Chase Freedom® line of credit cards. While lacking in comparison to its more fully-featured Chase Freedom® credit card family members, it still offers some good benefits in terms of simplicity and protection.
For example, the card offers a flat 1% cashback on all purchases and purchase protection, travel insurance and extended warranty protection.
Further, you also have the chance to earn a $50 Bonus Offer after making your first purchase on the credit card for students within three months of account opening.
The Chase Freedom® Student Credit Card has no annual fee and even offers $20 per year for keeping the account in good standing for up to the first five years of carrying the credit card for students in your wallet.
As a qualified student credit card cardholder, you can request a credit limit increase after making payments on time for five months in ten months.
6. Capital One Quicksilver Student Cash Rewards Credit Card – Annual Fee: $0
Capital One’s Quicksilver Student Cash Rewards Credit Card offers simplicity through a respectable 1.5% unlimited cashback rate on all purchases.
The card carries no annual fee and offers price protection, cell phone protection coverage. The downside, however, comes from failing to pay off your bill in full each month. These credit cards for students charge a high variable APR (26.99%), pushing the student credit card lower on our list.
Suppose you can pay your bill in full each month. In that case, this college student credit card makes a welcome addition to your wallet by earning 1.5% cashback not just in particular categories like gas stations and restaurants but on every purchase made after account opening.
7. Bank of America® Customized Cash Rewards Credit Card for Students – Annual Fee: $0
The Bank of America® Customized Cash Rewards Credit Card for Students offers great cashback categories you can change every month. This card’s categories allow 3% cashback with monthly category options but a generous 2% cashback every day at grocery stores and wholesale warehouse clubs.
The amount of cashback you can earn comes with limits, however. Specifically, you can earn cashback of up to $2,500 in the 3% and 2% categories combined each quarter with 1% unlimited on all other purchases.
You can choose between categories like gas stations, online shopping, restaurants, travel, drug stores and home improvement for your 3% categories.
The card comes with no annual fee ($0) and offers a $200 cash rewards bonus after making $1,000 or more in purchases within the first 90 days of account opening.
8. Discover® it Student Cash Back – Annual Fee: $0
Discover® it Student Cash Back offers several benefits students might find helpful as a starter credit card.
This serves as one of the better cards for no credit because it allows you to earn a high rewards rate when used on rotating quarterly bonus categories, up to 5% cashback. Further, you can participate in the Unlimited Cashback Match — only from Discover.
The Unlimited Cashback Match will have Discover automatically match all the cash back you’ve earned with your card over your first year.
There’s no minimum or maximum rewards, just a dollar-for-dollar match on all the cash back you’ve earned. Outside of the bonus categories listed by the card, all other purchases receive 1% cashback.
This card has no annual fee from the Discover® it Student Cash Back and even allows you to earn a statement credit each time you refer a friend, and they’re approved for this no annual fee unsecured credit card for students.
Keep track of your credit score on this unsecured card with a free Credit Scorecard.
9. Discover® it Secured Card – Annual Fee: $0
Discover® it’s secured card is another card from the Discover credit card issuer that can provide a way to build or rebuild your credit history.
When you apply for your Discover® it secured credit card, you place a minimum $200 refundable deposit down at opening. Your maximum credit line will equal that amount (up to $2,500) but will be determined by your income and ability to pay.
You’ll then be able to use this as a way of building good habits, like responsibly paying back what you owe each month and never going into debt.
It’s also risk-free to see if you qualify. You can see if you’re pre-approved for the Discover® it secured credit card that requires a security deposit without affecting your credit—there are no credit check implications on your credit score.
What is a Student Credit Card?
Student credit cards target college students and come designed to help them start building credit. Eligibility requirements fall lower than for many other types of credit cards.
While these cards tend to be easier to get approved for than standard credit cards, applicants still need to meet some qualifications.
Requirements include enrollment in school, a source of income or financial support and being age 18 or older.
Student credit cards work just like any other unsecured credit card by not requiring a deposit. However, student credit cards start with lower credit limits and a higher annual percentage rate (APR).
There may or may not be rewards offered, such as cashback or a statement credit for students who maintain a high GPA.
Because these often represent a starter credit card option for college students, consider cards without annual fees.
When you demonstrate your ability to handle credit responsibly, consider upgrading your card through your existing credit card issuer to receive a better card.
This can include more generous benefits, a higher credit line through a credit limit increase, or the ability to earn cash rewards or even upgrade to a travel rewards credit card.
Doing so will keep the credit line open, allowing you to continue building your credit and upgrading to better card terms and rewards programs.
Who Should Get a Student Credit Card?
Student credit cards are best for people who want to build a positive credit history.
Usually, you have to show you’re enrolled in school, but some cards exist without that requirement.
Some require you to be a U.S. citizen, so students studying abroad in the U.S. don’t always qualify.
These cards are handy for students aged 21 and older who aren’t employed. If you are between ages 18 and 21, most credit card issuers require you to either have an income or to have a parent or other adult co-sign for your card.
Once you are 21, you still need to show an income, but there are more acceptable forms of income. For example, if you’re married, your spouse’s income counts.
One reason not to get a student credit card is if you are very unconfident in your ability not to max out the card.
A student credit card can positively or negatively affect your credit score, so you might want to wait if you cannot meet your minimum payment each month.
Anyone who can spend responsibly benefits from student credit cards.
Alternatives to Student Cards
You might not qualify for any student credit cards or don’t feel ready to use one. Fortunately, several alternatives provide some (but not all) of the same benefits.
1. Secured Credit Cards
Student credit cards are typically unsecured cards. The main difference between secured and unsecured cards is that secured cards require a security deposit. Often, the deposit amount is equal to the cardholder’s credit line.
There isn’t any risk for the credit card lender because if you don’t pay your statement balances, the lender can take your deposit and won’t incur any debt. Since there isn’t a risk for the lender, it’s much easier for consumers to be approved for a secured credit card than for an unsecured one.
Even people with no credit can often get approved. Once you’ve paid your security deposit and have your card, you can start making purchases with it.
It’s recommended only to make small purchases to keep your utilization rate low. A low utilization rate leads to better credit than maxing out cards.
Every month you need to pay off your statement balance. Your purchases are not deducted from your deposit. You can get your security deposit back when you close the account or after you’ve gotten your card changed into an unsecured card.
Secured cards are a great way to get used to how a credit card works and to start building credit. However, secured cards aren’t the end goal.
These cards typically have lower spending limits, higher interest rates, and more hidden fees than other types of cards. You might have to pay an application fee, annual fee, monthly maintenance fee, or foreign transaction fees.
You want to eventually get an unsecured card, preferably a cash rewards credit card. Rewards cards can give you cashback as a statement credit or directly into a bank account.
Usually, you get other perks such as travel discounts and special offers at specific stores as well. You’re unlikely to get these perks with a secured card, and additionally, you should be able to get a higher credit line.
2. Prepaid Debit Cards
Prepaid debit cards involve no line of credit. Instead, they are loaded with money you can spend anywhere that accepts the card’s payment network, such as Mastercard or Visa.
You can reload the card with more funds if you run out. Government benefits are sometimes put onto these cards because they can be used almost anywhere and can be for any amount.
Prepaid cards can be used both at physical stores and online. There are a few benefits to using prepaid cards. The cards are more convenient to use than cash and make great gifts. You can’t overspend with a prepaid card either, and some cards come with liability protections.
However, you can’t earn interest on money on prepaid debit cards because they aren’t linked to a bank account. Unlike credit cards, these won’t help you build credit or rebuild poor credit.
Prepaid cards can involve a lot of hidden fees. You may be charged a small fee to use an ATM, reload money, foreign transaction fees, or a monthly maintenance fee.
You also don’t get the benefits you would with a student cash rewards credit card or another unsecured card.
3. Authorized User Status
Being an authorized user on someone’s credit card means you have access to that credit line. Only the primary cardholder is responsible for any debt accumulated.
The authorized user isn’t legally accountable (though they may have an informal deal with the cardholder).
You can be an authorized user at a younger age than the minimum to have your credit card. Depending on the card issuer, you can become an authorized user as young as age 13. Parents who add their teenagers as authorized users help them establish credit early.
Authorized users build credit even if they don’t make any purchases with the card. Later, this makes it easier to get approved for their cards or personal loans.
Only become an authorized user on a card that is always paid on time by someone you trust. If the card isn’t used responsibly, it can harm your credit score.
Note that becoming an authorized user is different than being a joint account holder. In the latter, you are legally responsible for any debt accumulated.
How to Make the Most Out of Your Student Credit Card
Once you’ve looked at student credit cards and strategically chosen one (preferably one with no annual fee and low or no foreign transaction fees), you need to use it responsibly.
Don’t spend more than you can afford. If you don’t pay your bill in full each month, you’ll need to pay interest.
Even if you can afford to nearly max out your card each month, keep your utilization low instead. High utilization negatively impacts your credit score, and try to keep your credit utilization ratio lower than 30%.
It may seem wise to open several cards right away to keep your overall utilization low, but this can also harm your credit. Applying for credit cards usually requires a hard credit inquiry, which temporarily lowers your score.
Too many inquiries in a short period can bring your score down significantly. You can eventually get more cards, but don’t do it all at once.
Don’t use your card for cash advances. You’re instantly charged interest. If you need cash, use a debit card instead. Read the fine print for annual and hidden fees, so you aren’t caught by surprise with charges.
Most importantly, always pay your entire balance on time every month. On-time payments are one of the top ways to earn positive credit history. Paying in full, rather than just the minimum, will help you avoid interest.
Setting automatic payments is an excellent way to ensure you’re always timely. Just make sure to still look over your statements for any errors.
What Happens to a Credit Card for Students After Graduation?
Credit card issuers don’t automatically cancel student credit cards when people graduate. The company may reclassify your card, so it isn’t marked as a student card anymore, but it continues to work the same.
Some issuers may offer you other cards to upgrade to or suggest you open an additional line of credit. Once you’ve landed a professional job and have updated your income, the credit card company may reach out to offer a higher credit line. Or, they might increase the line automatically.
Whether you keep using your card regularly, cancel it, upgrade it, or save it as an emergency card is up to you.
What Should You Do With a Credit Card for Students After Graduation?
Carefully consider your choices for what to do with your student card after you’ve graduated.
1. Continue using it
You aren’t required to cancel a student card after you graduate, and you can keep using it for as long as you want, exactly as you had when in school. If you like your card and it already has rewards, this is a good option.
2. Transfer your account to another card through an upgrade or product change.
Make sure no credit score impact occurs. Consider this before canceling a credit card for students because it preserves the length of your credit history, avoiding a negative effect on your credit history. Consider upgrading to a student cash rewards credit card, no annual fee card, a card with a higher credit line, or another beneficial type of credit card.
3. Apply for another card and cancel the credit card for students.
Probably the least preferred option, this might be necessary if the credit card issuer won’t upgrade you to a better card or won’t without an annual fee. In this instance, apply for a better credit card and then cancel your existing credit card for students once approved.
4. Leave the account open but cut it up and throw it away (or lock it up in a drawer).
Even if you stop using the card, it’s strategic to keep the account open. Your credit should have cards for long periods that stay open, and your length of credit history will lengthen this way.
If you don’t want to be tempted to use the card or worry it could be stolen, you can cut it up or lock it up. If you want to use it again (since the account is open), you can ask the card issuer to send you a new one.
How is a Student Credit Card Different from an Unsecured Credit Card?
Student credit cards fall under the umbrella of unsecured cards. Student cards are usually easier to get approved for than “regular” credit cards, and you can get one with little to no credit, which isn’t usually the case with other credit cards.
The spending limit is lower for student credit cards than other unsecured cards, and student cards often have a high APR.
There may also be an annual fee, usually reserved for top rewards credit cards with substantial benefits. Other costs, such as foreign transaction fees, may apply as well.
Since student credit cards are targeted towards students, some have rewards, such as a monetary statement credit for maintaining a high GPA. There may also be other benefits. Student cash rewards credit cards can earn you cashback on purchases.
Many of the benefits are the same as those you get with standard rewards credit cards. Overall, if you get one of the best student credit cards, the differences between it and other unsecured credit cards are negligible.
Both are easy ways to make purchases, build credit, and earn rewards.
- What is a Student Credit Card and Does It Help Build Credit?
- Should a College Student Get a Credit Card? [Is it a Good Idea?]
How Does a Student Credit Card Compare to a Secured Credit Card?
Student credit cards (typically unsecured) and secured credit cards are valuable options for somebody looking to establish a credit history. Either can work as a stepping stone towards getting a rewards credit card, better insurance rates, and a future mortgage.
Both cards also have the downsides of having a low credit limit and high interest rates. Although these cards share several similarities, there are key differences.
It’s easier to get approved for secured credit cards than getting a student credit card account. With a secured card, your credit line is often equal to your security deposit. However, if you’ve been using the card responsibly, you can sometimes get your credit limit increased.
Student cards have several advantages over secured credit cards. You don’t have to pay a security deposit, and you also likely won’t have to pay an annual fee, which is common with secured cards.
College students can often get cash back and other rewards through their student cards as well. If you enjoy your student credit card, you can often get the credit limit increased and end up keeping the card for the rest of your life.
Once you graduate, credit card companies can reclassify your card, so it isn’t considered a student card, and it’ll still work.
It’s better for your credit report you show you’ve had a credit card long-term rather than frequently closing cards. Overall, a student credit card is the better choice if you can get approved for one. If you can’t get approved for student cards, a secured card is the best next choice.
How to Get a Student Credit Card with No Credit History
Even if you have no credit history, it can be possible to obtain a student credit card. These cards expect you not to have much credit history. If you have a stable income, that can often replace credit history.
Alternatively, you can have somebody with a good credit score co-sign for your student credit card. If your application is denied because of a lack of credit history, check to ensure there aren’t any accounts in your name that you never applied to get.
If that isn’t the case, and you don’t have anyone to co-sign with you, you may need to establish some credit first (more on how to build a credit score as a student later in this piece). You can also look into other cards that don’t mind your lack of credit.
What are the Requirements for Getting a Student Credit Card?
There are different rules for young adults under 21 years old because of laws on how financial companies market cards towards this demographic.
As a result, you’ll need a few pieces of information, financial resources or help from another. Specifically, you’ll need the following in most cases:
- Identifying information. This includes a Social Security number or an individual taxpayer identification number (though some cards don’t require you to have this as you might be an international student applying for a card).
- Income sources or financial resources. This money can be earned or owned by yourself, but it can also be money you have a reasonable expectation of accessing for repaying the debts incurred on the card. This means you can have money from a third-party source count as income, such as if you have a spouse who works or has money and don’t work yourself.
- Monthly cost-of-living information. This includes costs like rent or housing payments.
If you don’t have income sources of your own and are between 18 and 21, you may need to ask someone to co-sign your application, add you as an authorized user on their card, or apply as a joint applicant.
What to Look for in Student Credit Cards
1. No Annual Fee
Just because you’re beginning your credit-building journey doesn’t mean you need to carry a credit card with an annual fee associated with it. Not all credit cards with an annual fee are bad, but holding off on the annual fee makes sense when you want starter credit cards.
2. Payment History Reported to Major Credit Bureaus
The purpose of starter credit cards is to assist with building credit as you have no or limited credit history. If your timely payments don’t get reported, you won’t make progress on building credit.
3. Rewards Programs
Having a rewards program can make using a credit card more useful, though only if you can control your spending.
You can earn rewards while you build credit history through making purchases on your charge card and making timely payments.
A cashback credit card rewards you with a percentage of everyday purchases made on the credit card in cash rather than points or miles that you can only redeem for specific items.
Cashback cards are typically a flat percentage of all everyday purchases made. Cashback makes card purchases earmark a portion of your spending for future use.
Some card options allow unlimited cashback, an unlimited cashback match, dollar-for-dollar match and more.
5. Rotating Cash Back Bonus Categories
Some card issuers rotate cashback bonus categories to incentivize you to make certain purchases on your cashback credit cards or debit cards.
They will likely still offer a flat cashback rate on all other purchases, like 1% on all other purchases not included in one of the bonus categories.
6. Sign Up Bonus
Some credit cards offer a sign-up bonus to entice new cardholders. This can be anything from an intro APR period, free rewards points or cashback bonuses.
Secured credit cards don’t typically offer such bonuses, but other types of credit cards found in this article may.
7. Balance Transfer
If you have credit card debt, a balance transfer may be the right choice for you.
A balance transfer card enables you to move your existing card balances over at either an intro APR or a low-interest rate.
A balance transfer credit card can keep short-term financing costs low until you can pay off your balance.
Though, be warned that using balance transfers indefinitely isn’t a strategy for controlling debt. Instead, balance transfers should focus on a short-term solution, not a long-term crutch to financing.
Also, using balance transfer credit cards to transfer a balance may entail a balance transfer fee. That’s why you should always read the fine print on what using balance transfer credit cards may mean for your bottom line.
If applying for a balance transfer offer, understand how it works, the balance transfer fee you may face and the overall terms on repayment.
You might even have an intro APR which converts to a standard APR with a higher interest rate after a certain period of time.
8. Low to Mid-Size Credit Limit
If you are trying to build credit, it makes sense that your initial credit limit isn’t very high.
You need time to prove yourself responsible with monthly payments before increasing the size of your available balance.
If you make your payments on time and maintain a low credit utilization ratio for a period, the credit card issuer should award you with a higher credit limit if you ask or apply.
9. No Foreign Transaction Fees
When traveling abroad or shopping online at a foreign store, having no foreign transaction fees (or international transaction fees) is vital for keeping costs low when spending money.
Keep in mind that if you are planning to travel internationally, you will want a credit card or debit card with no foreign transaction fees and EMV chip technology for added security against fraud.
10. Authorized User
An authorized user on a credit card enables you to add your friend, family member or significant other as an authorized user on a credit account.
If they build up their credit history and score with this method of using someone else’s available credit, it may be beneficial for them in the long run.
11. Co-signer Eligible
If you have a friend or family member willing to co-sign your credit card application, it’s an option. Keep in mind that if you miss payments and default on the account, they will be held liable for repayment of the debt.
12. Mobile App
Having a mobile app is very convenient if you plan to carry your card with you on the go.
This can allow you to monitor your account activity, make payments quickly and easily (and securely) over the phone or mobile device.
13. Minimum Credit Score Needed for Approval Marketing
Before applying, ensure that your chances of approval are high by checking what’s called a “pre-approval” or pre-qualification rate online.
14. Credit Score Monitoring
Keeping track of your credit score over time makes it easy to spot any changes that may have occurred. Having ongoing credit monitoring can be a great way to track whether or not you are making progress on building credit scores.
15. Credit Score Improvement Tips
If your score isn’t as high as it could be, there may be ways that you can improve your credit score with some effort and patience over time.
The card issuer should offer tips on how to improve credit scores and help you understand how to establish a history of on-time payments.
16. Customer Support
Some credit cards offer 24/7 customer support in the form of live chat, phone and email. This is an excellent feature if any issues arise with your account or you need assistance when traveling abroad.
17. Emergency Assistance Services
Even though emergencies are unexpected, it’s crucial that emergency assistance services be available when help is needed most.
Access to emergency assistance in events like a lost or stolen credit card or debit card, travel delays, issues with car rental agencies, running out of money when traveling abroad, and more can provide remarkable value.
18. Purchase Protection
When traveling abroad, there are many important factors to consider before hitting the road. Fraudulent charges and issues with purchases made while traveling can be a headache if you don’t have purchase protection in place.
Make sure your credit cards or debit cards carry purchase protection against fraud if you lose or have your card stolen.
How to Find the Right Credit Cards for Students
1. Look at where you currently bank
If you enjoy the bank or credit union where you currently have a bank account, that’s a great place to look into first. It may be easier for you to get approved for a card with your current bank because a relationship already exists.
However, if competitors have far better deals, don’t worry about being loyal to a bank and instead pick the best card.
2. Look at available offers – secured cards, pre-approved unsecured credit cards
Depending on the offers, it may be best to get a secured card (where you give a security deposit), a pre-approved unsecured card, or something else. See which cards you’re likely to be approved to get. There might be some that require an established credit score.
3. Understand the terms, trade-offs and how each type of credit card works
Read the fine details for each card. Check interest rates, the credit card limit, whether there is an annual fee or other fees, and if they report your card usage to credit rating bureaus.
4. Target cards with low fees, report credit to credit bureaus
Focus on cards with low or no credit card fees. Try to get a card with no annual fees, if possible. If you plan to travel abroad with your card, you’ll also want to look into foreign transaction fees.
Fortunately, there are cards with no foreign transaction fees if that’s a priority for you. You want your card use to be reported to major credit bureaus to establish credit and help towards a high credit score.
5. Apply to rewards credit cards if possible
If you might qualify for a rewards credit card, apply for it. The sign-on bonuses can sometimes be substantial, and you could earn cash back or other rewards.
Typically, you can apply cashback earnings right to your balance, and the lower your balance, the easier it is to pay off each month. Your rewards card might have an annual fee, but if you earn back more than you spend, it’s still a good deal.
What is a Credit Score?
A credit score is a number that predicts how likely you are to repay borrowed money.
It’s a three-digit numerical representation of the information in your credit report, managed by the three major credit bureaus: Equifax, Experian, and TransUnion.
This score ranges from 300 to 850 under the FICO scoring system, with lenders looking at these numbers when deciding whether or not to approve potential loans.
The most critical factor in determining your credit score is payment history, accounting for about 35% of the total. The other most significant factors are amounts owed (30%) and length of credit history (15%).
Balances on different types of loans make up less than 15%, while new account activity only contributes about ten percent.
Building good credit doesn’t happen overnight, as it measures your ability to manage loans and lines of credit wisely and responsibly over time.
What Goes into a Credit Score?
1. Payment History
Making timely payments is essential for your credit score, representing as much as 35% of your total FICO score.
Missing one payment can harm your credit score, though it shouldn’t ruin it entirely.
Why such a significant impact? Lenders want to assess your ability to repay debts promptly, meaning you pay what you agree to pay when you agree to pay it.
Do this consistently and over long periods, and you will see your credit score increase.
Because of the outsized importance of this credit factor, staying on top of payment due dates and amounts becomes a necessity to build credit.
Keep track of when payments must go to creditors by setting up automatic payments where possible.
Setting your bills on auto-pay can save not only time for individually initiating each payment but also the headache of being late and dinging your credit score.
2. Total Available Credit / Credit Utilization Ratio
Your credit usage, especially concerning your available credit, can determine your credit rating as well.
The metric used to measure this credit usage, called the credit utilization ratio, is calculated by dividing your outstanding revolving credit balances by your total available revolving credit balances.
This ratio provides valuable insight to creditors about how you use credit.
Lenders want to know how much credit you are using, especially how much credit is available.
A high credit utilization ratio (above 30%) will likely hurt your credit score, while a low one (below 20%) may help it or not have any effect at all on your credit rating.
This accounts for 30% of your credit score.
3. Length of Credit History
Lenders want to see how long you’ve had credit and how well you’ve handled while open. This credit factor can determine 15% of your FICO score by evaluating the average age of your open lines of credit.
All things equal, longer average credit histories result in better credit scores.
4. Types of Credit (Diversity or Mix of Credit Lines)
Not only do lenders care about your history and your ability to make timely payments (both huge credit factors), but they also like to see a diversity of good credit opportunities you’ve had in the past and maintain today.
This means having several credit accounts, managing your credit limit responsibly, and maintaining an excellent payment history.
Children won’t have many opportunities to have a wide array of credit lines, but they don’t need these just now. Instead, they can start with a single line of credit as an authorized user through a family member’s existing or new credit line.
If teenagers start building credit now, this new line of credit will still help them in the long run so long as the account remains open.
5. Credit Inquiries (New Attempts to Access Credit)
Creditors also want to see how often you seek new credit. Regularly going after financing may indicate an increased risk because you constantly seek new forms of financing to make your finances stay afloat.
Whether true or not, this can still serve as a red flag on your score, potentially hurting your credit if done too often.
These pulls on your credit, called hard inquiries, stay on your report for two years or longer, depending on the type of inquiry.
A child or person with a thin credit file shouldn’t worry too much about this, as any inquiry that hits their report now will likely fall off before they need it.
At this age, the child wants to establish credit and slowly build their credit limit through having wise credit use and more extended credit history.
How to Build a Credit Score as a Student
There are several ways to build your credit card as a student so you can have a long credit history and high score in the future.
1. Become an Authorized User
One of the easiest ways to start building credit is by becoming an authorized user on a parent or guardian’s credit card. Even if you don’t make purchases on the card, just being listed helps you establish credit.
Just make sure the credit card issuer is one that will report your status as an authorized user to major credit bureaus (not all do). Only become an authorized user if you trust the primary cardholder to make regular payments. Missed payments can negatively affect your score.
Parents often do this for this kids by letting them piggyback on their credit cards for build credit for the first time.
2. Get a Secured Credit Card
A secured credit card always requires you to put down a deposit. Deposits are inconvenient, but you are nearly guaranteed to get approved for a credit card by having one.
If you’re responsible with your secured card, it will help you build a strong credit history that will allow you to get an unsecured card next.
3. Apply for a Credit Builder Loan
Credit builder loans are specifically designed for people who don’t have a credit history and want to establish credit. To get approved for a credit builder loan, you will need to show you have sufficient income to make payments.
If approved, the amount you borrow is in a savings account during the time you make payments. You regain access to the money after you have completely repaid the loan, plus interest. Your payments are reported to one major credit bureau, at minimum.
These loans represent one of the easiest paths to build credit without a credit card.
4. Apply for Student Credit Cards
Student credit cards usually don’t require previous credit history (although you may need a co-signer under age 21). If you pay your statements consistently every month, these credit cards can help you build a good credit score.
The cards might have high interest rates, but that won’t affect you if you pay your bills in full.
5. Apply for an Unsecured Credit Card with a Co-Signer
Credit card issuers are more likely to give you an unsecured card if you have a co-signer because the co-signer is also liable for your debt. You are still the primary cardholder and responsible for your bills, but if you miss payments, the co-signer is also affected.
6. Make Payments on Your Student Loans (Early)
By making payments to your student loans early (while you’re still in school), you can start showing a history of timely payments. As previously mentioned, the most significant factor in one’s credit score is payment history.
Student loan payments get reported to credit reporting agencies, so early payments start establishing your credit right away and will help you have a high score later.
What are the Risks of Having a Student Credit Card?
There are three primary risks of having a student credit card. Fortunately, the risks can be easily avoided.
- Extra Fees. Sometimes a student credit card has extra fees, such as an annual fee or foreign transaction fees. When applying for any credit card, always read the fine print and ask questions, so you know any fees involved.
- High Interest Rates. Usually, your student credit card will have a high interest rate. If you don’t pay your bill in full each month, these interest rates can cost you a substantial amount.
- Impact on Credit Score. Finally, you can harm your credit score if you don’t make timely payments (at least the minimum). Consider setting up automatic credit card payments to avoid these risks. You should still check your statements regularly to ensure all charges are accurate.
How Does a Student Credit Card Help Build Credit?
Student credit card issuers send your payment activity to the three major credit bureaus. If you have a history of on-time payments, it shows you are responsible and able to pay off debt.
This established credit history vouches for you when you want a different credit card or need personal loans.
Since you typically get these cards in your upper teens or lower 20s, it also helps with the overall length of your credit history.
You can quickly build good credit by getting a student credit card young, making regular payments, and keeping utilization low. Just make sure you don’t miss any payments.
How Long Does it Take to Build a Credit History?
Building credit history usually takes less time than you think. It can take anywhere from three to six months for a credit card account to start showing up on your credit report.
However, it may be less time than that if you use the same bank or financial institution’s other services like checking accounts and loans. From there, to raise your score higher, you’ll need to pay attention to the most influential factors in determining your credit score.
These are all within your control and mostly rely on you to make prudent decisions with your card, pay on time, live within your means, and not attempt to access too much credit at once.
Doing this consistently across long periods will help your credit improve.
How to Apply for Credit Cards for No Credit History Consumers
There are different rules in place for young adults under 21 years old because of laws on how financial companies market cards towards this demographic.
As a result, you’ll need a few pieces of information, financial resources or help from another. Specifically, you’ll need the following in most cases:
- Identifying information. This includes a Social Security number or an individual taxpayer identification number (though, some cards don’t require you to have this as you might be an international student applying for a card).
- Income sources or financial resources. This money can be earned or owned by yourself, but it can also be money to which you have a reasonable expectation of access for repaying the debts incurred on the card. This means you can have money from a third-party source count as income such as if you have a spouse who works or has money and you don’t work yourself.
- Monthly cost-of-living information. This includes costs like rent or housing payments.
If you don’t have income sources of your own and are between 18 and 21, you may need to ask someone to co-sign your application, add you as an authorized user on their card, or apply as a joint applicant.
About the Author and Site
In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time. My job routinely required extended work hours, complex assignments, and tight deadlines. Seeking to maintain my momentum, I wanted to chase something ambitious.
I chose to start this personal finance website as my next step, recognizing both the challenge and opportunity. I launched the site with encouragement from my wife as a means to help younger generations learn how to invest, manage and plan their money with confidence.
I have not been compensated by any of the companies listed in this post at the time of this writing. Any recommendations made by me are my own. Should you choose to act on them, please see the disclaimer on my About Young and the Invested page.