Credit Scores for College Graduates

May 25, 2009

Your credit score when you graduate from college is largely based on decisions you made while in school.  Those choices and your resulting credit history may impact some of the first things you do after graduation such as renting an apartment or buying a car.  We’ll take a look at some of the things that may have damaged your credit report and some steps you can take to get your credit on track.

Credit Score Issues

No Credit History. One of the biggest issues college graduates face is their lack of credit history. Credit reports and scores thrive on your payment history and your ability to manage your finances. If you haven’t had a mortgage, loan, or credit card that you’ve had to make payments on then lenders don’t know how you’ll handle a loan if they give you one.

Credit Card Debt. One of the most frequent vendors that setup on college campuses are credit card issuers getting you to sign up for your own credit card. This is a great start for establishing credit history if you use the card wisely, make payments on time, and do not charge more than you can afford to pay. Those who use the card to charge items they cannot afford usually leave college already in credit card debt and with poor payment history.

Student Loan Debt. Combined with credit card debt, many college grads start their new life in student loan debt. Student loans usually have deferred payments until six months after graduation, but you’re already in debt for what may amount to tens of thousands of dollars.

No Employment History. To top it all off, you may be graduating without a job. This means you don’t have the ability to make payments for any debt you have. Unfortunately, even if you have a job, your job history probably isn’t long enough to make you look like a good credit risk.

Building Credit History

Get help from Mom and Dad. Start building your credit as soon as possible. Ask Mom or Dad to add you as an authorized user for one of their credit cards. Use the card to make purchases that you can afford to pay. Then pay off the balance on a monthly basis or make payments and make them on time.

Only take on what you can manage. It’s about building a credit history, which means using the card and paying it off, not maxing the limit and burying yourself in debt that causes your credit score to plummet. If you can manage a credit card payment, then this is the first block for building a foundation. It’ll help you get approved for other types of credit such as an auto loan or furniture credit account.

Always pay on time. No matter what you are paying for—rent, car payment, credit card payment or electric bill, make your payments by the date they are due. One of the biggest factors used to calculate your credit score is your history of making payments on time.

Build an emergency fund. This won’t directly impact your credit score but having an emergency fund gives you a financial buffer you can rely on to pay bills if you lose all your income.  Paying from this fund can help prevent you from missing payments or charging up your credit card balances.

Whether you’re graduating this year or you have some time left, there are ways you can build good credit. Applying for various types of credit and loans helps to start building your credit history. Be sure that the credit you apply for and use is paid for, on or before the due date. Don’t wait to start building your credit history because you’ll need to rely on it when it comes time to get a loan for a car, house, or business.

This post on credit scores for college grads is part of a series on personal finance for college graduates.  Some of the other topics covered include auto insurance for grads, budgeting, health insurance after college, and getting started investing.


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Kristie Lorette is a personal finance writer who spent over eight years working in the real estate, mortgage and credit industries.

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