With the end of the school year just around the corner, many seniors are beginning to focus on life after college.
While a new grad's credit score might not be top of mind at the moment, it's arguably one of the most important things to think about as soon as they get their diploma — if not sooner.
A good credit score is the key to achieving many of the milestones you'll encounter post-college. Having a healthy credit profile makes it easier to rent an apartment, save money on car insurance, qualify for the best credit cards and the best rates if/when you refinance your student loans. It can even help you look good to any prospective employers who may run a credit check.
The first step to having good credit is establishing credit. The length of your credit history makes up 15% of your credit score, so the sooner you start building credit the better.
Below, Select breaks down how to get a good credit score post-college.
Check your credit score
Before you can get good credit, you first need to check your credit score to see where you currently stand.
A credit score is a three-digit number that is a snapshot of your credit profile. Essentially, it tells lenders your potential credit risk and your ability to repay the money that you borrow. Scores typically range from 300, on the low end, to 850, on the high end.
There are lots of ways to check your score for free (and it won't hurt your score to check it regularly). Here are three free credit score resources available to everyone:
- CreditWise® from Capital One: Free VantageScore from TransUnion
- Chase Credit Journey: Free VantageScore from TransUnion
- Discover Credit Scorecard: Free FICO Score from Experian (only available to Discover cardholders)
These resources can also provide insight into the key factors affecting your credit score, simulators on how certain actions (such as paying off debt) might impact your credit and helpful tips for improving your credit score.
Start paying off your student loans on time
If you're graduating with student loans, you may be surprised to learn that you've already started building credit.
Student loans are a form of installment credit, which means they show up on your credit report. Examples of other installment loans are auto loans and mortgages. Unlike revolving credit (think credit cards), installment credit is when a borrower is given a finite amount of money to pay back in a fixed number of monthly installments over a specified amount of time.
Paying your monthly installment credit bills, such as student loans, on time will help improve your credit score. Your payment history (whether you pay on time or late) is the most important factor that determines your credit score, counting for over a third (35%) of your credit score calculation. For this reason, it's crucial that you make sure you pay your student loans on time, or at least have a plan in place to start paying them off once you get your first job.
Sign up for a credit card
Opening a credit card and using it responsibly is an easy way to build your credit history while also improving your score.
Showing responsible credit behavior — paying your credit card bill in full and on time each month — shows lenders that you can manage your debt wisely, which in turn makes your score go up.
But it's important to be mindful when charging expenses on your card. Ideally, you want pay off your entire balance each month to avoid incurring expensive interest. Carrying a balance month to month is a big mistake that can get you into steep credit card debt fast.
Select reviewed and ranked the best cards for recent college grads so you can find the right card for your wallet:
- Best card for no credit: Petal® 2 "Cash Back, No Fees" Visa® Credit Card
- Best card for bad credit: Capital One Platinum Secured Credit Card; (see rates and fees)
- Best card for fair and average credit: Capital One QuicksilverOne Cash Rewards Credit Card (see rates and fees)
- Best card for good credit: American Express Cash Magnet® Card
- Best card for excellent credit: Citi Double Cash® Card; (see rates and fees)
When you move into your first apartment and start paying bills, there's a tool that can help instantly raise your credit score.
*Experian Boost™ is a free feature that lets you add your on-time phone, internet, cable, utility (gas, electricity, water) and streaming payments like Netflix®, HBO™, Hulu™ and Disney+™ to your Experian credit report. According to its website, average users receiving a boost reported a 13-point increase in their FICO® Score.
Read more
Petal 2 Visa Credit Card issued by WebBank.
Information about the American Express Cash Magnet® Card has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.
