Extra credit: Six ways college students can build—and maintain—good credit habits

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A critical life skill to master early is good financial management. Part of responsible financial management eventually involves a sensible approach to credit. And a great way to establish—and maintain—a healthy credit score is by opening your first credit card.

Entering college inevitably presents opportunities to learn more about credit cards and how they work. The sooner you get your first credit card, the sooner you can start building a strong credit profile. But before you apply for the first credit offering you see, take seriously the responsibility that comes with it. A thoughtful, planned approach to your new credit card will set you up for healthy habits down the road.


1. Apply for a card with a reasonable limit—for you. 
Typically, it’s smart to apply for a credit card with a lower credit limit when you’re just getting started. It’s likely you’ll be approved for a card with a lower limit (a boon to your green credit profile!) and it sets built-in spending limitations. That way, if you are tempted to spend a little more than planned, you can’t rack up too much debt right out of the gate.


2. Learn the ins and outs of your new card and billing statements.
Credit cards come with a lot of fine print. Pay attention to key terms like APR, which stands for “annual percentage rate.” That’s how much interest you’re charged on top of your monthly balance. Fees—which include annual, application, processing, etc.—can also rack up. But some credit cards have rewards, too. Find out if the card offers cash back or bonus cash based on the types of purchases you make and where you shop.


3. Keep spending in check.
Keep your outstanding balance as low as possible month to month. Just because you have a $1,000 credit card limit doesn’t mean you should spend to it. A good rule of thumb is to keep outstanding balances below half of the entire credit limit. Carrying high balances can negatively impact your credit score. 


4. Establish good credit with small, recurring purchases.
Charging gas, weekly groceries, or a monthly cell phone bill to your credit card can be a great way establish revolving credit without actually accruing debt. They tend to be smaller and occur on a regular basis, but are necessities for most people. Using a credit card for these types of ongoing purchases can help build a strong credit profile, since you’re consistently using your card and paying off your balance.


5. Pay on time, every time.
Remember to pay your bill on time, no matter what. Even one negligent payment can impact your credit score, especially when your credit profile is still in its infancy. Set up reminders for yourself to make sure you have your bill covered when that due date comes around.


6. Always pay more than the minimum.
Paying the minimum payment each month won’t help you chip away at the balance, and carrying a balance on your credit card will cost extra money in interest charges. (A hefty portion of that minimum amount due every month is the interest.) Read monthly statements closely and aim to pay as much as you can toward that balance to get it down to zero as quickly as possible.


Establishing good credit habits is an important part of smart financial management. Check out more of Comenity’s financial resources to learn how you can protect yourself and take a smarter approach to your finances.

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