Students Tips: Building Credit With A Credit Card

My Credit May 20, 2014

When you’re a kid, your age is the most important number in your life, and you proudly count it on your fingers. In high school, you might worry about your GPA or your SAT score.  In adulthood, another number becomes relevant: your credit score.

Credit scores are used for a variety of important life events, including renting an apartment, qualifying for a mortgage, financing a car and even applying for a job. Because of this, you should begin building credit early and carefully as you become financially independent.

Understand your credit score
Your credit score, or  FICO score, is used by more than 90 percent of top lenders when making lending decisions, according to, according to myFICO. A FICO score is calculated by a mathematical equation that looks at aspects of your financial life, including your bill payment history, amount of debt, length of credit history, new credit and types of credit used.Your score can range from 300 to 850, and the higher the better. You can help build that number in several ways.

How to build your credit score
1. Use a credit card: 
Credit bureaus don’t track debit transactions, so you can build your credit history by having at least one credit card and using it responsibly. What counts as responsible use of a credit card? First, it’s important to make some purchases with your card. An untouched credit card doesn’t help your credit score. Next, be sure to pay your bills on time, and aim to keep a low balance on your card.   It’s important to remember that late payments or going over your limit can hurt your credit history.

When you get your first credit card, carefully select the right type to fit your situation. Many financial institutions offer benefits for signing up and using your card, such as reward points or airline miles, so decide what you’re looking for in a credit card and check out all your options.

2. Pay your bills the right way: Remember when we said your FICO score will be affected by your bill payment activity? This is a major factor in the health of your credit. Always pay your credit card bills on time. Late payments immediately put a dent in your score (although the damage isn’t irreparable as long as it doesn’t become a trend).

To help you pay your bills on time, consider signing up for, sign up for online banking or download a mobile banking app. You’ll be able to check your balance wherever you are, track purchase, pay bills, and more. You can also sign up for alerts for when payments are due or when your balance has reached an amount that you define.

Along with paying on time, it’s important to pay your credit card bills in full. Carrying a high balance on your card can hurt your score, since responsible cardholders don’t spend more than they can afford. Plus, a credit card balance gets charged interest, which means you’re creating additional expenses for yourself.

Finally, it’s not just about paying credit cards on time. Late payments on other bills, like rent and utilities, can also affect your credit score.

3. Stay on top of your credit report: Once you have some credit, check your credit report regularly to guard against errors. Legally, you’re entitled to see your credit report for free once a year, so take advantage of the opportunity. You can’t fix a problem with your credit if you aren’t aware of it. And if there’s an error, you’ll need to dispute it as soon as possible.

The earlier you begin using smart habits with a credit card, the stronger your credit score will be. This will increase your chance of approval for life milestones later on, like a mortgage or an auto loan.

Visit usbank.com for more information on how to raise your credit score.