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The Resource Center Credit Fraud & Credit Monitoring | article

Dorm Dangers: Avoiding the Pitfalls of Having a Credit Card in College

Building a good credit score* is important for anyone, and for many Americans, college can be an opportune time to start. Going to college is considered a rite of passage for many people, and it's often viewed as a prime opportunity for individuals to establish their independence. That includes financial independence, and many Americans take out their first credit card in college. While establishing a good credit score early can certainly help college students later in life — specifically when they look to apply for a loan, obtain lower insurance rates or rent an apartment — it can be a more difficult task than some students think.

Pros and Cons of Getting a Credit Card in College
On the one hand, obtaining a credit card can give college students a leg up when it comes to establishing a good credit score. Building strong credit can put consumers in a better position when it comes time for them to apply for a loan, rent an apartment, buy a home, sign up for a cell phone plan or even get a job. Additionally, a credit card can provide a source of funds in an emergency, when an individual may not have cash on hand.

However, without exercising financial responsibility, getting a credit card may wreak havoc on a college student's credit reports and scores. If they make excessive charges and fail to pay them off in a timely manner, college students may find themselves in a credit hole. While some credit cards offer lower interest rates and terms initially, some college students are hit with higher fees later on, making it difficult for them to keep up with payments. That might hinder their ability to save money or pay off other expenses.

Exercise Good Credit Habits
It's not impossible for college students to maintain a good credit score after they obtain a credit card. There are a few good credit habits that should be followed.

  1. Use the card for smaller purchases — College students can keep their credit balance under control by only using the card for small, occasional purchases. That may prevent a financial institution from closing the account due to inactivity while also keeping the monthly payment low. It may also help keep an account's credit limit low, which could prove beneficial if a student has to charge an emergency expense to his or her card.
  2. Pay bills on time — Cardholders should be sure to pay off their credit card and any other bills on time each month.
  3. Only apply for one card — Obtaining multiple cards on a short credit history could ravage an individual's score, making it important to maintain just one card and to avoid co-signing for anyone else's credit account. Checking up on his or her credit reports and scores may also help a college student stay on top of his or her financial situation.

*The scores you receive with Identity Guard® are provided for educational purposes to help you understand your credit. Lenders use many different credit scoring systems, and the scores you receive with Identity Guard are not the same scores used by lenders to evaluate your credit.

Credit scores are provided by CreditXpert based on data from the credit reporting bureaus.

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