In my sophomore year of college, I was a volunteer financial coach teaching fellow Buckeyes about the importance of building credit early without having a credit card myself. The hypocrisy! So I decided to change that, but how could I get a credit card without a credit history or a steady income?
If you said, “Get a secured card!” you would be correct! Secured cards are a great option for college students who do not currently have a credit history and are looking to build their credit score (which can affect things down the road like approval of loans, interest rates on those loans, employment, and more!).
A secured card acts like a security deposit that you may have already placed on your off-campus housing. You know, that one-month’s rent that your landlord holds onto “just in case” you wreck the place? And they always take at least some, or all, of your deposit for a hole in the wall that was there when you moved in? Trust me, this works much better in a credit scenario!
I schedule an appointment with my bank and asked if I could get a secured card, so they told me to put $300 down as a “security deposit” that they would take from if I ended up missing a payment. That $300 also became my credit limit, or how much I could spend on that card per month (keep in mind that you should only spend up to 30% of your credit limit, so $90 in my case!). They told me that if I kept up good habits for a year, I could get my $300 back and then exchange the secured card for a credit card with a higher limit.
So that’s what I did! I made sure to only put a few purchases on my secured card per month to stay below that $90 and used my debit card for my other purchases. I paid everything off in full at the end of the month and ended up with a credit score in the “very good” range, even though I had only had it for a year! Because of this, I was able to go back to my bank, get my $300 back, and exchange my secured card for a credit card with a $1500 limit.
This is a great way for college students to start building credit while building good spending habits as well! I recommend checking out the options at your bank of choice or going to Nerdwallet.com, where they can break down all of the secured card options out there for you. I am available by email (moriarty.67@osu.edu) if you have any questions as well. Go build that credit!
–Bryan Moriarity, Scarlet and Gray Financial Coach