What’s a good credit score for college student? If you can answer this question correctly, you will make every effort to improve your current credit score to reap financial aid benefits. Don’t let your financial burden prevent you from pursuing a college or graduate education; scholarships or other forms of assistance can help you overcome and eliminate your stress. Hanfincal visited today to determine what credit scores you should consider good. Look at this article.
1. Why a good credit score is important for college students?
Students and everyone want a good credit score because of its numerous advantages when applying for a loan or mortgage. So, what is the allure they can provide? Students with good or excellent credit are frequently given the best interest rates on credit products, which can save them tens to thousands of dollars throughout their lives.
There will be a lot of things you want to buy as a college or graduate student, whether it’s the iPhone 13 Pro Max you’ve been eyeing for months, your first car, or even a deposit for your first apartment. Having a good credit score will be a massive relief with all of those requirements. You will save a considerable amount of money by taking advantage of low-interest rates.
Ensure you catch up with your first student loan payment deadline and make every effort to pay those payments on time to avoid incurring late charges, which will harm your credit report.
Why would a student want a good credit score?
2. What is a good credit score for a college student?
A good credit score for a college student is 700 to 749 on the standard 300-850 credit-score scale. This is the FICO scale and more than 90% of U.S. lenders rely on them. Scores from 750 to 850 are excellent, while 640 to 699 are considered fair, and below 640 are bad credit. Even if their credit history is new, there is no prioritization or lowering score criteria for students. The length of credit history is an essential factor in most credit score calculations, accounting for up to 15% of final score tabulations. Many people open their first points of credit during college.
In 2020, the average credit score for a college student in the United States was 711, increasing eight points from 2019. You’ll be able to get better loans, insurance, and credit card deals if you have a good score.
What is considered a good credit score?
3. How are credit scores calculated?
The factors used to calculate the credit score are based on a secret algorithm, but we will only discuss the five main aspects of calculating the credit score (we use the FICO scale). These are the five factors:
- Payment history (35%): Your payment history demonstrates to lenders how you have handled payments in the past, and it accounts for the lion’s share of your credit score. If you are late or miss a small credit, your credit score hurts, and your credit trustworthiness is also affected. Any late payment indicates to lenders that you are a higher risk, significantly impacting your credit score.
- Amounts owing (30%): One of the most important criteria for your credit score is your credit utilization ratio on credit cards. A balance is an amount you owe concerning your credit limit. Try to use no more than 30% of your available credit for the best utilization score.
- Credit history’s length (15%): Credit bureaus recheck your credit history. Three things can be checked: how long have you opened your accounts, how long have you opened your specific account types, and how long since you have used those accounts.
- Mixed credit (10%): Lenders prefer to lend to consumers who have multiple types of credit, such as installment credit, auto loans, revolving credit cards, and mortgage loans.
- New credits (10%): You will receive new credit inquiries when you apply for new credit. Very useful if you use and manage multiple credit cards simultaneously. However, this can be a double-edged sword regarding your credit health. If you receive too many inquiries, you may be desperate to borrow too much. This can result in a low credit score. When applying for new credit, it is best to be cautious.
Many people wonder if factors such as nationality, religion, or race are considered when calculating credit scores. Certainly not! The Equal Credit Opportunity Act (ECOA) prohibits lenders from basing credit decisions on those factors.
4. How to get a good credit score as a college student?
Here are 6 strategies to get a good credit score that college students can do:
- Making on-time payments on your bills: This action will increase your creditworthiness cause your payment history can account for up to 35% of your credit score. So, remember to make your payments on time monthly or set up automatic payments if you can not remember the deadlines.
- Get an annual fee-free credit card: A credit cards are one of the best options to get a better credit score. When you make the minimum payments on time, you can add positive information to your credit reports. Moreover, you can apply for a student credit card if you are a student with little to no credit history. If your credit score falls outside of the acceptable range for a student card, you can apply for a secured credit card.
- Examine your credit reports regularly and dispute any errors: Keep an eye on your free credit reports from one of three major credit bureaus. If you discover any incorrect or forged items on your credit report, you should file a dispute.
- Become an authorized user: As a student, becoming an authorized user on someone else’s account is one of the quickest moves to improve your credit score. Choose people with a good credit history and high credit scores to authorize you; it will help you more than you think.
- Spend no more than 30% of your credit limit: The higher this ratio, the more debt you have, and having too much debt can harm your credit health. Try to keep your spending under 30% of your credit limit to the greatest extent possible.
- Seek financial help online: Many reputable financial institutions can help you improve your credit score online, and it is entirely FREE. If this is something you’re interested in, Credit Monitoring can assist you:
Is it difficult for you to obtain a good credit score for college student? Understanding credit scores in college will help you make financial decisions in the future. There is no preference for student loans; your credit score determines all interest rates you can get. So, now is the high time to begin building your credit history. If you don’t do anything that hurts your credit score, you’ll be surprised at how many points you get after a few years. Allow Hanfincal to assist you in managing and shaping your personal finances.
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