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How to Build Credit While in College

May 15, 2019

As a child, it’s not uncommon to think that there are monsters hiding under your bed or maybe in your closet. You never actually think it through as to what really could be hiding but it’s something scary. Trust me, you didn’t want to ever have to come face-to-face with it. Thus, my reasoning for staying in bed every night and never moving. Oh, and of course hiding my arms under the blankets. You know you did it too! Well, at twenty-eight I think I’ve finally met those monsters.  It was my credit!

Throughout my life, I was terrified of credit. I, like many others, was taught credit cards lead to lifelong debt and it could ruin my life. Not only that but any minor change like closing a credit card account affected my credit score – SCARY! Credit, like most new things in life can be intimidating or maybe even scary, but we have to start somewhere.

What most people, myself included, don’t understand about credit is that it can be a great thing when used responsibly. A good credit score can help with getting a house or buying a car. I now understand that credit is not a scary thing. Credit is only something you need to be responsible with. If you are a college student looking to build credit purchase only things that you can pay for. If you cannot guarantee that you can stay on top of payments, you shouldn’t be making purchases.

While in college, if you decide to build credit it can help jump-start your life after college. Filling out applications with your credit score will be easy because you’ve already started building credit.  In college, credit can be built through everyday expenses and can benefit you in the long run. Here are some simple ways of building credit that will not break the bank or “ruin your life,” but help you in the future.

Find a Credit Card

While in college, you may see a credit card offer dropped in your mailbox every week. Actually reading through the information and what the card offers is KEY. Look at interest rates and cash back rewards. Some cards have cash back rewards on points earned by using the card on things such as gas and groceries. By using a credit card for necessities and paying it off, you are earning easy credit while still in college.

Some cards offer cash back opportunities on travel. If you’re going away to college, using a credit card could be a great way to earn points for a visit back home or a weekend getaway. Remember, use a credit card on things you will be able to pay back on time. This way you will be building credit while also gaining reward points to redeem on things you want to do.

If you’re attending college you may want to check out student credit cards. Student credit cards can be a really great way to start building credit while you are in school. Be warned that you will still need to demonstrate a decent salary to qualify for a student credit card, simply being a student is not enough. Most student credit cards will not charge an annual fee and many offer additional perks.

 

Learn How Completing College Early Can Save You Money

 

Secure Credit Cards

If you don’t qualify for a student credit card or any traditional credit card because you don’t have a credit history look into secure credit cards. They work just like other credit cards but require a cash deposit, first. This deposit is usually in the hundreds or low thousands. If you make every payment in full and on time you’ll receive back your down payment. If you do not make payments on time or in full the lender keeps your down payment.

Rent

While being in college you will likely be moving into your FIRST apartment. An apartment can be a great way to start earning credit. Putting the rent in your name and paying it on time can assist in building credit. In order for rent to go towards your credit history, your landlord must be reporting the rent payments to one of the credit agencies. If your landlord isn’t reporting your rental payments it will not help you to build a credit history. In today’s society, it is also pretty uncommon for landlords to report rent payments to a credit agency.

If your landlord isn’t reporting your rent payments to a credit agency it can’t hurt to ask if they could start! When sharing an apartment with roommates, it is vital for everyone living there to pay their share of rent on time. Finding roommates that share accountability is important when you are building a good credit score.

Get a Credit Builder Loan

A loan that is in place to IMPROVE CREDIT?! Sign me up! When you have a credit builder loan, you make payments into your savings account. After one year, you will get the amount you paid back and increase your credit score! A credit builder loan does not require good credit to begin, you just have to show proof of income. Start by applying for a credit builder loan, and begin to make payments on time. In order for you to be benefiting from a credit builder loan, you must be paying on time. The pros to a credit builder loan include getting the money you put in and having a better credit score at the end of the year!

Become an Authorized User

Becoming an authorized user is a smart and easy way to embark on creating credit while in college. Being an authorized user means that you can use another person’s credit card and your name will be included on the account. The process simply has the account user add your name to the credit card account. As an authorized user, you will not be responsible for paying back debts on the credit card. This responsibility will legally be in the original account holder’s name. The main goal for being an authorized user is to increase your credit score by having an account holder with an outstanding credit history. If you have an account holder who is known for paying their debt on time, this will increase your score, because you’re on the account. Keep in mind that you should ask someone who is trusted and reliable when becoming an authorized user.

Start on Student Loan Payments

As a former college student, I know that going to school full time while working enough to have money to start paying off student loans can seem impossible. Remember, you do not have to pay off large amounts right away. While in college, consider putting money aside to start paying off loans when you can.

If you start loan payments early you will start to see positive growth on your credit score. The benefits of having student loans include helping build your credit score. If you decide to start paying off loans while in school, it will be before your loan deadline and will create less to pay off later. Even if you are not able to pay off large sums, these small amounts can make for fewer payments later on and a better credit score when you graduate from college.

Credit Utilization

A top way to build credit is not to utilize all the credit that is available to you. For example, if you have a credit card with a credit limit of $2,500 and the balance is $2,500 that would be 100% credit utilization. Credit utilization is important because it impacts your credit score. The maximum recommended credit utilization is about 30%. Therefore, if your credit card had a maximum limit of $2,500 then 30% of that would be $750. In this example, to avoid negatively impacting your credit score you should not spend over $750 on your credit card.

It can be difficult to be disciplined as a college student, but it’s important to remember that this money is not free. It’s also likely that this is probably your first credit card ever! Exciting, but this is a really important rule of thumb! This is a credit that you will eventually need to pay back. In an effort to build credit you want to be sure you’re creating good financial habits for yourself too. Be sure to stay disciplined and not utilize over 30% of your credit card.

BONUS: Credit Reports

While we are on the topic of creating good financial habits, the number one habit you can create is looking at your credit report. If you talk with any financial expert, this will be their number one piece of advice! Yearly, check your credit score and your credit report. Think about it like an annual physical at the doctor, but for your finances. Review your credit report to make sure that there are no errors or fraud to your credit history. If you visit AnnualCreditReport.com you can receive a free credit report from all three major credit agencies in the U.S. and a free credit report can be requested every 12 months.

Having paid off debt or using credit in college will prepare you for future payments on cars, houses, and throughout your adult life. Knowing your responsibilities and taking care of payments on time is key to achieving a better credit score by the end of your college career. Consider these options when deciding how to build credit and choose one that will benefit you in the long run.

 

Are Student Loans Impacting Your Credit Score?

 

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Woman holding a smartphone
2019-10-15
Best Apps for Budgeting in College

Managing money is hard, but budgeting in college? That’s a whole different ballgame. For a lot of students, you have so much to worry about with classes, work, and other involvements that finances often slip your mind. So how do you hold yourself to a budget when you can barely remember to feed yourself dinner? Luckily, we live in an age full of apps to help you get a jumpstart on budgeting and money management. Here are a few of our favorites.   Mint®. Mint is a free mobile app where you can view all of your banking accounts in the same place. It automatically updates and puts your transactions into categories so you can see where all your money is going - and where it’s coming from. It also recommends changes to your budget that could help you save money. Its features include a bill payment tracker, a budget tracker, alerts, budget categorization, investments, and security features.   PocketGuard®. Like Mint, PocketGuard allows you to link your credit cards, checking, and savings accounts, investments and loans to view them all in one place. It automatically updates and categorizes your transactions so you can see real-time changes. PocketGuard also has an “In My Pocket” feature that shows you how much spending money you have remaining after you’ve paid bills and set some funds aside. You can set your financial goals, and this clever app will even create a budget for you.   Wally®. This personal finance app is available for the iPhone, with a Wally+ version available for Android users. Like other apps on this list, it allows you to manage all of your accounts in one place and learn from your spending habits. You can plan and budget your finances by looking at your patterns, upcoming payments and expenses, and make lists for your expected spending.   MoneyStrands®. Once again, with this app, you’ll have access to all the accounts you connect. Its features allow you to analyze your expenses and cash flow, become a part of a community, track and plan for spending, create budgets and savings goals, and know what you can spend without going over budget.   Albert®. A unique feature that Albert emphasizes is its alert system. When you’re at risk for overspending, the app will send you an alert. The app also sends you real-time alerts when bills are due. Enjoy a smart savings feature, guided investing, and the overall ability to visualize your money’s flow and create a personalized budget.   Before you download any budgeting app, make sure you check out the reviews and ensure it’s legitimate. Because a lot of apps ask for your personal financial information, it’s essential you verify their legitimacy before entering your account number. Listen to what other people have to say and then choose the option that works best for you, because not every app will be perfect for everyone. Budgeting in college may be hard, but downloading an app is just one way you can make it easier. Maybe you don’t want to use an app at all. If you’re in that boat, you can check out some other approaches to budgeting here or here.   Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.
Woman sitting on floor looking at laptop computer
2019-10-14
Motivating your student to apply for scholarships

Do you find your child lacking motivation when it comes to finding grants and scholarships? While some students are intrinsically motivated and will search out and apply for scholarships on their own, other students may need a little encouragement in order to accomplish these tasks. While it can be frustrating, it's important to remember that this is likely the first time your child has had to navigate financial waters. Because of that, we're sharing some simple ways you can motivate your child to apply for scholarships before and during their college years.

Discuss college costs and finances with your child.

Your student may not fully understand how much college can cost. Hold an honest discussion with your child where you review the costs of their top college choices, how much money (if any) you will be able to contribute, the significance of
creating a college budget, the realities of student loans, etc. While they may be more focused on which clubs they'll join and their newfound freedom, helping them understand the importance of financial help can make their college year much more enjoyable.

Share scholarship success stories.

Sometimes, all it takes to motivate your student to apply for scholarships is sharing how their peers are reducing the cost of college. Ask other parents which scholarships their child was able to secure, and even let your child know the lump sum their friend was able to save. Take note of the steps each student performed in order to obtain the scholarships and go over with your student ways they can implement strategies into their application process.

Assist with developing a scholarship organization plan.

When it comes to applying for college scholarships, it pays to be organized. From deadlines to account passwords to application requirements, your student will have a multitude of details to remember. Developing a scholarship organization plan will help deter your child from becoming overwhelmed, which in turn will motivate them to complete applications. Share these organization tips with your child to make the process of applying for scholarships a little easier.

Provide incentives.

Using extrinsic motivators, such as rewards, can prod your student into action. Just as you may have bribed your toddler during the toilet training phase, that same concept should work with your teenager. Consider making a deal with your child that if she applies for a certain amount of scholarships, then you will provide half of the money so she can purchase that new phone or outfit for which she has been saving up money.

Give your child a free pass.

Most teens would gladly give up their household chores to complete other tasks, even if the task involves academics. Allow your child a free pass on chores if they use that time to search out and complete scholarship applications.

Set realistic goals.

If you expect or nag your child to spend most of her free time looking for scholarship leads and filling out applications, no wonder they aren't motivated. Work with your student to set realistic goals for the number of hours spent each week on the scholarship application process.

Acknowledge and encourage your child’s efforts.

Positive encouragement can work wonders to increase your child’s motivation. By letting your child know that you have seen and appreciate their efforts to apply for scholarships, you are giving them the confidence they need to continue applying for more. For more information about scholarships, be sure to read the scholarships and grants from our friends at eCampus Tours. Your teen can also perform a free scholarship search by clicking here.   Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.
Couple sitting at table on the computer
2019-10-11
5 Financial Tips for After You Refinance Student Loans

The process of refinancing student loans can be like studying for finals: you prepare for weeks, the stress keeps you up at night, and once the big day finally passes, you feel a huge sense of relief. You might even go out with friends to celebrate. But like college, you can’t just forget what you learned. You have to apply that knowledge to the next step.    When it comes to refinancing student loans, the next step is to continue honing your financial savviness. Find other ways to reduce and quickly pay off debts so you can start spending money on the things you want, instead of the things you need! Below are five tips to consider after refinancing student loans. 

Pay Down Other Debts

Take the extra amount you paid toward that student loan and apply it to other debts. With a $50,000 loan at an 8% interest rate, you could owe approximately $480/month for 15 years. Your total interest over the life of the loan is $36,000. But if you’re able to reduce that interest rate to just 6%, your monthly payment drops to $420/month and the total interest paid is $26,000. What could you do with an extra $60/month? What could you do with an extra $10,000 over 10 years? A lot.    Consider all the types of debt and ongoing expenses you have that you could apply that $10,000 toward:
  • Credit cards
  • Car loans
  • Home loans
  • Medical bills
  • Childcare
  • Cell phone bills
  • Utility bills
  You can also opt to keep that extra money aimed at your loan. Refinancing student loans often establishes terms with no prepayment penalties. So paying off loans faster can alleviate the burden of debt. This can take many forms, including:
  • Make an extra payment: In addition to your minimum monthly payment (12 payments a year), consider an extra payment every few months. In the example above, if you save $60/month on your refinanced student loan, you will have enough money for a whole extra payment every 7 months, with no additional work done on your part. Just a little saving!
  • Pay more than the minimum: If you don’t want to worry about orchestrating extra payments, overpay during each regular monthly payment. By going above and beyond the minimum payment, you’ll keep from accruing as much interest on your principal balance. Going back to our example again, if you were to keep that extra $60 applied to your monthly payment of $420 (for a total of $480), you could pay off your loan 2–3 years earlier at a savings of $5,000. It might seem tempting to use that extra $60 as play money right now, but $5,000 could be an even bigger play day in the future!
  • Make single lump-sum payments: Use your tax return, annual bonus, or an inheritance to make lump-sum payments toward the principal balance on your refinanced student loan. Again, the mindset here is to pay off that loan as fast and comfortably as you can.  

Negotiate Other Bills or Debts

Don’t stop while you’re on a roll. Once you secure better terms for your loan, find other ways to lower your bills. Use that financial savvy you picked up refinancing student loans, and negotiate with other debt collectors. This negotiation isn’t limited to loans—you can often get better rates with your cable and internet provider too.    You also likely have a dozen or more automatic monthly payments coming out of your checking account or linked to a credit card. Some banks or apps like
Truebill® and Trim® can help you find and cancel subscriptions that are unused or that you forgot you signed up for in the first place. What started as $60/month saved could possibly turn into $150/month after canceling unused subscriptions. 

Consolidate Credit Card Debt

You can consolidate loans, but did you know you can also consolidate credit card debt? If you have multiple cards that you owe money on, you can roll those cards into a single loan. Depending on your credit score and other factors, a consolidated loan can have lower interest or a lower, more achievable payment. You could also take out a personal loan with a lower rate to pay off cards directly with the credit card company.

Keep At It

Refinancing only sounds like the hard part. The real challenge comes after you sign the papers. Getting a new interest rate and a new loan term won’t save you money if you don’t make on-time payments and pay off your loan according to those new terms. Adult life has a lot more things on its to-do list. Set up automatic payments so you don’t risk forgetting. At the very least,   set monthly reminders in your calendar app to write a check or manually process your payment. 

Tell Your Friends

ELFI offers options for student loans and refinancing student loans. But did you know ELFI also has a referral program1 that can help you make (and save) even more money? Sign up and create a personalized referral link to share with friends or family. When someone refinances using your link, you’ll get a $400 referral bonus check and your friend will receive a $100 credit toward the principal balance of an Education Loan Finance loan. There’s no limit on the number of people you can refer. Learn more at elfi.com/referral-program-student-loan-refinance.     Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.   Terms and conditions apply. Subject to credit approval.   1Subject to credit approval. Program requirements apply. Limit one $400 cash bonus per referral. Offer available to those who are above the age of majority in their state of legal residence who refer new customers who refinance their education loans with Education Loan Finance. The new customer will receive a $100 principal reduction on the new loan within 6-8 weeks of loan disbursement. The referring party will be mailed a $400 cash bonus check within 6-8 weeks after both the loan has been disbursed, and the referring party has provided ELFI with a completed IRS form W-9. Taxes are the sole responsibility of each recipient. A new customer is an individual without an existing Education Loan Finance loan account and who has not held an Education Loan Finance loan account within the past 24 months. Additional terms and conditions apply.