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College is an ideal time to start building a credit history, which is vital later on when it’s time to open utility accounts, apply for car loans and mortgages, and even apply to rent an apartment.
For those without credit history, the best way to start is to be added to a parent’s account, or open a secured credit card.
After that, the smartest move is to open a “real” credit card, like the Chase Freedom Unlimited®.
See Business Insider’s list of the best credit cards for students »
If you’re a student or recently graduated college, establishing a good credit profile probably isn’t at the top of your mind — but you’ll quickly learn the importance of having a good credit score. It’s the key to getting approved for credit cards and other loans, and even applying to rent an apartment.
According to a recent study, 23% of millennials don’t use credit cards. While the dangers of credit-card debt are real, using a credit card responsibly can be an effective tool for building your credit score, and as a side benefit you could qualify for a card that earns you rewards.
Chase Chase Freedom Unlimited®Why your credit profile matters
Virtually every American has a credit profile, which is a history of their use of credit, including accounts held, past borrowing, and payment history. Banks that issue loans and credit cards use the information in your credit profile to determine how trustworthy you are, and how likely it is that you’ll pay back whatever you may owe in the future.
Your credit score, meanwhile, is a numerical representation of all of the raw information in your credit profile. It’s made up of a few components, including your history of on-time payments, how much outstanding revolving debt you have proportionate to your total credit line, and the average length or age of your credit history.
Having a solid credit score isn’t just important for mortgages and loans, though. Most landlords will run a credit check before approving your application to rent an apartment. Similarly, companies like utility providers and cell phone carriers check your credit score to make sure you’ve displayed responsible payment behavior in the past.
Read more: How to build credit to increase your credit report
Why students should build credit with a card
The responsible use of credit cards is an essential part of establishing a healthy credit history, which is crucial for securing major consumer loans and mortgages. I’ve known people five, six, and seven years out of college who’ve had trouble opening utility accounts, or signing up for a now-needed credit card, because they had no credit history. That created a ton of headaches that would have been easier if they had started building credit during school.
Once you have a credit card, the key is to simply use it exactly as if it were a debit card.
A lot of the fear of credit cards comes from …read more
Source:: Business Insider