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Student Credit Cards
Getting a credit card is one of the first step you take as a student in establishing your credit. However, you only get a card if you have some credit history. So it is not easy for students to get a card with decent APR or rewards. But credit card is not the only way to establish a credit history. If you take a close look at FICO score and how it is calculated, you'll find hope.
FICO Score or credit score is a three digits number that help lenders evaluate you as a potential borrower. Having an excellent FICO score is no guarantee that borrower will pay the loan back but it makes it very unlikely that borrower will default. Here is the basic breakup for FICO score.
- 35% Payment History
- 30% Outstanding Debt or total balance on all secured or unsecured loans
- 15% Length of Credit History
- 10% Recent inquiries on your credit report
30% Outstanding Debt or total balance on all secured or unsecured loans
- 10% Type of Credit in use(Secured/Unsecured/Revolving)
As you can see, There is not much you can do about length of credit history if you're a student. However, you should take payment history and inquiries items seriously. Some people think that if they don't have any credit card debt or credit card issues, their score should be high. What they don't realize is that payment history is the biggest component of your score. So whether it's a small water or electric bill or even a unpaid parking ticket, it is going to cost you dearly when applying for new credit. You should take all your bills seriously and should work diligently to have a solid payment history to get a high FICO score even if you may not have a credit card. Once your FICO score is high enough to be considered good, there is no reason why you can't get a credit card.
Another easy way to establish some good credit is to find a co-signer. A co-signer needs to be someone who already have a good established credit and his/her role on your application is to essentially guarantee the payment even if you fail to pay it back. You can apply virtually every form of loan with a co-signer. Most often, a co-signer is a parent or guardian, though anyone with good credit can co-sign. If you can't find a cosigner, there is still hope. There are utility companies(electric, phone etc) who would work with you to get you a service without having any credit history at all. They might demand some security deposit but if you have all the good intentions of paying your bills, why not put a security deposit down. Debit cards are also a good way to establish credit history. these card are tied back to your checking or saving account and you can only use them if you have money in your account. So essentially they work in the same manner as secured credit cards.
You also need to be aware of the efforts and exclusive offers that big credit card companies make to students. Remember, if they get you early enough as a customer and you manage your credit responsibly, they have gotten a great deal in finding a good customer for life. So both parties benefit from deals like this.
We have listed some of the good credit card offers exclusively for student and/or people trying to establish credit.
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