Updated: Jul 15
In today's economy, credit plays a pivotal role, and establishing a solid credit history is essential for financial well-being. As a student, starting early on building your credit can set you up for future success. In this blog, we will explore a few effective ways to kickstart your credit journey and maximize your benefits as a student.
Why is it important?
As you move forward with your life in USA, there would be many instances where purchases with full cash payment would not be possible. For example when buying a house, car, next apple product or simple laptop. At that time credit is useful.
For many services like electricity connection, WiFi/Phone network, renters insurance, you will have to pay some advanced deposit, which can be waived or reduced if you have a good credit score.
You must have faced credit checks while leasing your apartment, but mind you, you were saved as an international student for not having credit history. If you have been in USA for a while, you might not get lease at some places for not having a credit history.
Factors that Affect Credit History
Several factors can impact credit history in the United States. Here are some of the key factors:
Payment History: Your payment history is one of the most important factors affecting your credit history. It includes whether you make your payments on time, have any late payments or missed payments, and any history of defaults or bankruptcies.
Credit Utilization: This refers to the amount of credit you are currently using compared to your total available credit. It is recommended to keep your credit utilization below 30% to maintain a good credit history.
Length of Credit History: The length of your credit history is also considered. Lenders prefer to see a longer credit history, as it provides more information about your creditworthiness. This includes the age of your oldest credit account, the average age of all your accounts, and the age of your newest account.
Credit Mix: A healthy credit history involves having a mix of different types of credit, such as credit cards, loans (e.g., auto loans, mortgage), and retail accounts. Having a diverse credit mix can positively impact your credit history.
New Credit Applications: When you apply for new credit, such as a credit card or loan, it can have a temporary negative impact on your credit history. Multiple applications within a short period of time (known as hard inquiries) may be seen as a red flag and can lower your credit score.
Public Records: Negative public records, such as bankruptcies, tax liens, or civil judgments, can significantly impact your credit history and remain on your credit report for several years.
Credit Account Management: How you manage your credit accounts also plays a role. This includes factors like the number of accounts you have, your overall credit limit, and whether you have any delinquent accounts or accounts in collections.
When it comes to establishing a substantial credit history in the USA, beginners have access to two primary types of credit cards:
If you're aiming to build a credit history from scratch, secured credit cards are an excellent option. They provide you a credit based on the security that you provide in terms of a fixed deposit. These cards function similarly to debit cards, requiring an upfront deposit that becomes your credit limit. With no risk on the bank's side, your credit activity is reported to credit bureaus, helping you establish a solid credit history.
Unsecured credit cards are the standard credit card option available. Banks offer you a credit limit based on factors such as your previous credit history, bank balance, and expected income. As a student or beginner, the bank where you open a checking account may provide student credit card options tailored to your needs. Additionally, companies like Zolve offer credit based on your student credentials and I-20. Nova Credit also provides options by utilizing your Indian credit score to assist you in obtaining credit cards in the USA.
Strategy to Build Credit History
Why you should get a Credit Card?
In the US banking system, the interest rates on savings accounts and deposits are negligible, often hovering around a mere 0.002%. In such a scenario, consider the advantage of earning 1-5% cashback on your everyday purchases with a credit card. It's like gaining interest on your savings without relying solely on the minimal returns from traditional savings accounts. But that's not all – credit cards also come with a plethora of additional benefits, such as flight insurance and rental car insurance, providing you with added peace of mind.
One major perk of credit cards is the attractive welcome offers provided by credit card companies. These substantial offers can prove extremely valuable, especially when it comes to covering your initial expenses without depleting your bank account before you even start earning from your on-campus job.
By utilizing a credit card wisely, you can maximize your financial flexibility, take advantage of cashback rewards, and enjoy the added security and benefits that come with it. So, why miss out on the advantages? It's time to explore the world of credit cards and unlock the potential for smart and rewarding financial management.
Start reaping the benefits today!
Some Great Credit Card Options for Students:
Unlocking Opportunities Discover stands out as an excellent credit-building option for students. With a generous unsecured credit limit of up to $2,200, it provides you with a solid foundation. Not only does Discover offer attractive deals, but it also presents quarterly 5% cashback opportunities that prove invaluable for your purchases.
At the end of the first year, they will match the accumulated cashback again, so the cashback amount for the first year becomes double. 1-5% when the purchase is made and additional 1-5% at the end of the first year.
You can use this link to apply for Discover Card and get 125$ Cashback. 100$ from Discover in terms of statement credit.
Unlocking Student Credit Opportunities Chase understands the unique needs of students and offers a dedicated student credit card. Once you have established credit with another card, the Chase student credit card can provide you with additional benefits and perks tailored to your student lifestyle. It's a valuable tool to expand your credit portfolio and unlock further financial opportunities down the line.
One Key Benefit of Chase Freedom Credit Cards is when you rent a car through hertz, enterprise or any other option for that matter, you do not need to pay for insurance for damage, which comes out to be about 25$/day, which is significant savings on car rental.
For freedom unlimited card, you get 1.5% cashback on all your purchases
For freedom Flex card, you get 5% cashback on merchants in quarterly category
Additionally you get Doordash pass
You can use the link here to apply for Chase Credit Cards and get 100$ in statement Credit from Chase. You can also enquire in your bank if its not Chase, about different student credit card options that they have.
The Power of Cashback Capital One offers a student credit card with a competitive 1.5% cashback rate on all your purchases. This means that every dollar you spend puts money back in your pocket. By leveraging this cashback feature wisely, you can make your everyday expenses work for you and build your credit score simultaneously.
You can use this link to apply for Capital One Credit Card and get 100$ from Capital One in terms of statement credit.
Seamlessly Transitioning to the USA If you have a credit history from your home country, Nova Credit can be your gateway to obtaining credit card offers in the USA. By leveraging your existing credit history, you can showcase your financial responsibility and increase your chances of qualifying for credit cards with attractive terms and rewards.
Building a strong credit history as a student is a critical step towards financial success. With options like Discover, Capital One, Chase, and Nova Credit, you have the tools and resources to kickstart your credit journey effectively. Remember, the earlier you start, the more time you have to establish a positive credit history. Take control of your financial future today and pave the way for a prosperous tomorrow.