As a student, you most likely have student loans. Once your loans go into repayment, making regular on-time loan payments is a critical first step in building good credit, as it shows that you are a responsible borrower. This will improve your credit score.
Using credit cards is another way of establishing a credit history. Credit cards can be useful in emergencies and for purchases of expensive items, such as computers, but users must manage them carefully to keep debt to a minimum and to avoid developing an adverse credit history.
It is important to make regular on-time payments on your credit cards and to avoid carrying a balance. Credit card debt can negatively affect credit for years. As with private student loans, it is important to research and compare credit cards and the terms and interest rates they offer.
Your credit score plays an important role in determining the amount of credit for which you are eligible. According to FICO, the company that calculates the credit scores used by most lenders, the information used in calculating your score includes
- Payment history (35 percent)
- Amount owed (30 percent)
- Length of credit history (15 percent)
- Types of credit used (10 percent)
- Debt loads (10 percent)
Paying your credit card bills and loans on time is the best step you can take to develop and maintain a strong credit score.