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When it comes time to take out a loan for a house or a car in the future, a huge indicator to lenders is your credit score, which reflects on how you repay purchases that are bought on credit — money that you “borrow”. If you pay everything back in full and on-time, your credit score will be higher and will reflect on you better than if you make late payments or small payments.

Building a solid credit score is essential to your financial well being after you graduate from college, so it’s in your best interest to start building your credit score now. The easiest way to do so is with a credit card.

A credit card? In college?!

Oh yes. If you frequently use your credit card, you’ll have an easy way to begin improving your credit score.

There are many different types of credit cards out there, you’ll need to look into different offers. Some offer better rewards, others offer lower interest rates. Find what works for you.

How to start building your credit score

• Use your credit card. Use your card to make most purchases, such as food, textbooks, gasoline, etc. Using cash now and then is fine, but using your card is a bit more useful. You can’t build credit if you’ve never used it.
• Only spend what you can otherwise afford. Using your credit card makes it tempting to spend more than you should because you don’t have to pay until later. But you should imagine that your card is cash so that you’re not spending more than you can afford to.
• Pay your bill on time. Pay your credit card bill on time, every time. Late fees will add up and will definitely hurt your credit score. Nowadays, most credit card bills can be quickly paid online, so there’s no excuse.
• Pay back the entire balance. Although it’s tempting to only pay the minimum monthly payment, your credit score will improve much more if you pay back the entire balance.

Essentially, your credit card becomes cash that you pay back each month entirely. There are no harmful effects to using your credit card, provided you spend within your means and pay back the entire balance on-time each month.

What about a debit card?

Debit cards offer all of the conveniences of credit cards, like connecting you easily to your bank account, ease of online shopping, and so forth, but you won’t build credit with a debit card. As long as you’re not tempted to overspend and you can handle paying your bill once a month, there is no reason to choose a debit card over a credit card. In fact, credit cards offer all of the benefits of a debit card with the addition of building your credit score.

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