CREDIT SCORE 101
As you get ready to start the school year, you may wonder, “What’s the average credit score of a college student?”
According to Credit Karma, most new college students have a credit score of about 630. If you’re between the ages of 18 and 25, now is a perfect time to learn how to responsibly grow (not ruin!) your credit score.
Many young academics need to take out a student loan or line of credit to purchase books and supplies. This could be the first account tied to their credit profile.
Read on to find out how you can build and manage your credit long-term. Financial success comes with planning and effort, but with knowledge on your side, you’ll be able to take smart first steps.
Your credit score isn’t just about the type of credit card you can apply for; it affects many aspects of your life. If you have an average score, you can still get loans, open credit card accounts, and find housing – but you might end up paying more than someone with a higher score.
Housing: Your credit score is one of the first things considered when you apply for a rental property or try to purchase a home. Landlords may ask applicants with lower credit scores for a larger deposit or even pass on them and choose renters with higher scores.
Housing: Your credit score is one of the first things considered when you apply for a rental property or try to purchase a home. Landlords may ask applicants with lower credit scores for a larger deposit or even pass on them and choose renters with higher scores.
Utilities: Want to hook up high-speed internet in your new pad? If you’re just starting to build credit, you might need a co-signer or have to pay a deposit. Bummer. Many new scholars must accept this fact. Skip the hassle by building your score with responsible habits.
Employment: Some employers may run a credit check during the application process — as if starting your first job isn’t nerve-wracking enough! The good news: You still have plenty of time to build up your score while you’re in college.
You may be thinking,“Why does my employer need to run a credit check?” Many positions handle money and personal information, so they need to gauge your trustworthiness and aptitude. If you’re applying for an upper management role, your potential employer will most likely check your credit, but they will let you know before this happens. Keep in mind, federal law allows employers to check credit, but some states don’t.
| Vehicle Cost | Credit score | Interest rate | Monthly Payment | Length of Loan | Total Cost of Vehicle |
|---|---|---|---|---|---|
| $10,000 | 630 | 8.9% | $317.53 | 3 Years | $11,431.08 |
| $10,000 | 730 | 1.9% | $285.99 | 3 Years | $10,295.64 |
As you can see, the person with the higher credit score had lower monthly payments and paid $1,136.16 less for the vehicle.
Now that you know the average credit score for college students, you might be wondering what factors go into calculating that ever-important three-digit number.
Credit is a weighted calculation of the following:
35% payment history: While you’re in school, set any loan, credit card, or recurring bills on auto-pay. Paying on time (at least the minimum amount due) has the biggest impact on your credit score.
30% credit utilization: Credit utilization is the amount you have borrowed from your total line of credit. This should hover around 30% or less. For example, if you have a credit card with a $500 limit, you shouldn’t keep a revolving balance of more than $150 to stay in the 30% credit utilization range.
15% credit history length: If you’re still in school, you probably have just a couple of years of credit history, if any. Your credit age is the average age of all your open credit accounts combined, so the only way to advance your history is time.
10% mix of credit: When you’re in the beginning stages of building your credit, you shouldn’t be terribly concerned with this factor. As you get older, lenders will be more concerned with your credit mix, and they’ll want to verify you’re able to manage multiple loan types.
10% new credit: It might be tempting to apply for any credit offer that comes your way, but this could damage your score quickly. Each time your credit gets a hard pull, the credit bureaus are notified, and this pull can remain on your profile for years. New accounts can also lower your average credit age. Remember to only apply for new credit or loans when you can handle the monthly payments.
According to VantageScore, around 20% percent of people aged 18 – 22 don’t have a credit report or score. If you haven’t established credit yet or have a bad score, it’s important to learn how to remedy this before you graduate. Ideally, you want to be close to the average college student credit score of 630 or preferably higher. Here’s how you might get started:
Apply for a secured card. This entails making a cash deposit when you open an account. More than likely, the issuing company will set your credit limit as the same as your deposit. So, if you put down a $200 deposit, that would be your spending limit.
Apply for a student credit card, but be wary of the fine print. Some credit card issuers try to take advantage of college kids. They offer high interest rates or annual fees because they figure your parents will bail you out if you can’t pay.
Avoid high interest by only charging what you can comfortably pay off each month. Otherwise, you’ll be stuck paying high-interest rates.
Team up with your family. If you want a better-than-average credit score, ask your parents to add you to their credit cards as an authorized user. Even if you never have access to the card, being tied to a strong profile can boost your credit 60 -100 points within a few months.
Apply for a Credit Builder Plus loan with MoneyLion. You can gain access to competitive-rate installment loans up to $1,000 that help you build credit through on-time payment history while helping you save money. Plus, you can enjoy credit monitoring tools, 0% APR cash advances, and rewards. We’ll report your payment history to the three main credit bureaus, but don’t forget the golden rule: On-time payment history is key to building good credit.
If you’re wondering if you can build credit without a credit card, the answer is yes! It’s a breeze when you make your college debt work for you. As long as you stay consistent with your loan payments, your credit will improve. You don’t need to make big payments to get a head start. Even putting $25 per month toward the loan can help you build credit.
With so many innovative financial options available online, young people can easily manage their money. To set you on the right track early, we compiled a small list of healthy habits to incorporate into your college life:
Open a bank account. Having your own bank account gives you the freedom to accept direct deposits, monitor your spending habits, and gain access to other financial products and services. Consider our $1/month RoarMoney℠ account and get fast access to a RoarMoney virtual card.
Save money weekly. Discover how to save when you’re in college.
Always pay your bills on time. As mentioned above, paying bills late has a huge affect on credit score. Set up auto-pay for all recurring bills and payments that are tied to your credit profile.
Monitor your spending habits. A daily check-in with your bank account is a must. If you’re using RoarMoney, you can check the MoneyLion app for all your financial stats and monitor your total financial health using our Financial Heartbeat® tool. You’ll receive weekly spend reports, so you can track your spending by category.
Start investing a small amount of money each week. This could lead to potentially higher returns than saving, and therefore, you may not have to contribute as much money to reach your goals. If you don’t have the funds to invest, try our fully-managed investment account. More than 90% of our customers are first-time investors, and you can be one of them!
We know you’re busy hitting the books, writing papers, and cramming for exams, but don’t forget to squeeze in some time to learn about your financial future. The following resources are easy to digest and will discuss even more tips about improving your college student credit score:
