No, it isn’t as easy as it once was for a college student to get credit. The reason is the new credit laws. These laws are actually helpful to keep students from acquiring too much credit that they can not handle. However, these new laws can make it harder for a student when it comes time to purchase bigger things later in life.
Suddenly a student may wake up at the age of twenty five and realize that he/she hasn’t established any credit and thus finds it really difficult to get a loan for important things such as cars or homes. So what should be done? How can a college student begin to establish credit with the new laws and without ruining his/her credit rating?
First, this student must act responsibly. This is what the banks and the credit card companies want to see.
The first step that may help any student build his/her credit is to apply for a secured credit card. This is a credit card for those students who have a steady job and can show proof of income. Then the card will have to be secured by cash in hand. If the student proves that they can use this card responsibly, over time the credit card company may actually apply money on the card. When choosing such a card, make sure that it is one in which the company reports to the credit bureaus so that the student is actually building some credit history.
Next, the student and the student’s parents may want to consider opening up a small credit card together. The parents will have to co-sign the card and thus be as responsibly for payment as the student is. The student will again have to show proof of income and must have a steady job. Generally, the amount of credit on these types of cards are generally small thus the parents need not worry too much about his/he credit rating getting hurt too bad if the student does default on payment. Hopefully, the student will keep up with the payments and will begin building a good credit score.
Finally, parents can add their children who are in college as authorized users to their own credit cards. No, this won’t help their children’s credit any and it does pose a huge risk if the parent has a high amount of credit on their cards. But it will give parents a chance to see how well their children can handle credit when given the opportunity.
Of course, while your child is trying to build his/her credit, stress to him/her the importance of budgeting and how helpful this is in building a great financial plan.