How to Establish your Credit using Student Credit Cards

Credit cards for students are a great way of establishing a credit history. It allows a student to start building credit early so that by the time he or she graduates, he/she can present a credit report to prospective employers, landlords, or lenders.

But there is more to building credit than just owning a student credit card. As a student, you also have to be aware of your duties as a new credit card holder to make sure that your credit history will be flawless and your credit score will be impressive.

Unfortunately, many students get slumped in credit card debt. Most of them even graduate with unpaid debts because of reckless credit card usage. Before applying for a student credit card, understand how the FICO credit scoring method works. Being aware of how your credit score is calculated will make you become more careful about using your privileges as a student with a credit card. Below is the breakdown of the factors that influence your final credit score.

1. 35% Payment history
This is the largest percentage in the FICO scoring model. How punctual you are in paying your student credit card bills make up the largest percentage in your credit score. This is why keeping up with your student credit card balances is very, very important. A single delay or miss on your payment will affect your credit score plus you will be charged with high interest rates and penalty.

2. 30% Outstanding debt
The amount of your outstanding debt in your account makes up 30% of your score. That is why it is important not to get into the habit of maximizing your credit limit. To be safe, make sure that you don't go beyond 30% of your allotted credit in your student credit card.

3. 15% Length of your credit history
Students who obtained student credit cards will have an advantage over people who has not started building their credit. Once you received your student credit card, all you need to do is to make sure that you will manage it correctly to keep your credit history free from any flaw.

4. 10% Recent inquiries on your credit report
After your graduation and you start applying for credit from other credit cards or car loan lenders, do not submit a lot of applications to different companies at the same time. Too many inquiries on your credit report will have a negative impact on your score. It's best to study your choices first before deciding on which particular company or lender you decide to apply for.

5. 10% Types of credit or accounts in use
Acquiring different types of credit such as credit card, car loan, personal loan, insurance, and home loan can boost your personal credit score provided that you manage to keep all your debts in control. Being able to pay different types of creditor on time will prove your capability and credibility as a borrower. Naturally, lenders will feel more confident in approving your application.