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Credit in college: Getting a credit card

June 04, 2015

By Pam Leibfried

Part 1 of two-part series on Credit in College. 

It’s not as easy as it used to be for students to get credit because banking reforms in 2010 put limits on credit for consumers under 21. Now, in order to be approved for your own credit card, you are required to have “independent income” or a co-signer.

But if you’re a financially savvy college student who is looking to start building your credit history now, don’t worry. It’s still possible to get a credit card and establish good credit while in school. To help you do so, we’ve written a two-part series on college credit. Part 1, below, shares some tips on ways to get a credit card so that you can start to build a solid credit history. Part 2 will advise you on how you can use your credit card wisely to protect and improve your credit score so you’re primed for post-graduation success.

Get a boost from your parents

A great way to establish a credit history is to have your parents add you as an authorized user on one of their credit card accounts. As an authorized user, you can effectively “piggyback” on your parents’ credit history, giving your own credit history a jump-start. Once you have this bit of inherited credit history, it’s more likely that you’ll be approved for your own credit card (provided you also have some income). This tactic will only benefit you if your parents have solid credit themselves. If their credit history is spotty or if they are late with a payment on the card, it could negatively impact your credit.

If your parents are willing to make you an authorized user, be sure that you discuss in advance what their expectations are. Some parents hope their “piggyback” boost will qualify you for your own card, but they don’t want you to use theirs. Some want you to use their card only for books or school fees. Some want the card used for emergencies only; if so, be sure that you and your parents are on the same page in terms of what qualifies as an emergency.

Qualify for a card yourself

If you have a steady income during college, even if your job is only part-time, you may qualify for your own credit card. Here are three of the best credit card options to consider before you apply.

  1. A good bet to start out is a credit card issued by the bank or credit union where you have your savings and checking accounts. It’s more likely that your application will be approved if the person reviewing your application can see proof of your financial stability and responsibility. If you’ve accumulated savings from your summer job, haven’t bounced checks and deposit your paychecks like clockwork – because again, they can’t, legally, approve your solo application unless you have independent income – they’ll be more inclined to consider you creditworthy.
  2. Another option for your first credit card is a store card (Target, Sears, etc.). These cards typically have a low spending limit and can be used only in the store (or chain) that issues it. Because store cards can’t be used everywhere the way a Visa or MasterCard can, they represent less risk for lenders. My first credit card, for example, was a Sears card. Once I had used it responsibly for a while and established a credit history, I was offered a Sears MasterCard. Later, I qualified for other, better credit cards.
  3. If you can’t get a regular credit card on your own, a secured credit card is a good option. With these cards, you deposit money as the “security” to cover your credit limit; in effect, you are prepaying the bank to give you a credit card. If you build a solid history of paying on time every month, you’ll establish a credit history that will ultimately make it easier for you to get a regular, unsecured card.

Get a card via a co-signer

If you’re under 21, ready to have your own credit card, but don’t have a steady income that will qualify you on your own, you’ll need a co-signer. For most college students, that person will be a parent, but could also be a grandparent, aunt/uncle, older sibling or other adult who is over 21 and has solid credit. By co-signing, they are putting themselves on the hook for any credit you accumulate but don’t pay, so don’t be surprised if they say “no” when you ask them to co-sign. Don’t take it personally, as it doesn’t mean they don’t trust you. Maybe they’re gun-shy because they’ve been burned in the past when they co-signed for your older cousin. Or maybe they think that cosigning for you means they’ll have to do the same for all their other kids or grandkids. 

Building credit without credit cards

Your credit report is about more than just your credit card history, so if you can’t get a card on your own and you don’t have anyone to cosign or make you an authorized user, don’t despair. Utilities, cable companies, internet providers and other companies often report payment history to credit bureaus, so it is critical that you pay your bills on time every month. The biggest factor in determining credit scores is your payment history. If you are late paying a bill and that company reports you to a credit bureau, your credit score will go down.