Advantages & Disadvantages on College Students With Credit Cards

Establish Credit History

A strong credit history is highly important when the time comes for financing a mortgage. Upon receiving an application, lenders and creditors immediately pull credit reports to review an applicant's credit score, amount of present debts and payment record. Applicants without a credit history may not acquire financing. You need credit to build credit, and obtaining a credit card as a college student opens the door to good credit history. Some banks readily offer student accounts to individuals in college, and banks report account activity to the credit bureaus on a monthly basis.

Having a credit account can provide college students with a real life lesson in budgeting and managing their personal finances. Credit card companies send monthly statements with due dates. College students then have the responsibility of remembering when payments are due, and reserving enough money to make payments by the due date. Paying on time is crucial to building a good score because creditors notify bureaus when payments are 30 days late.

Although credit cards can give college students an early start with regards to building a credit history, owning a credit card also opens the door to high credit card bills. Some banks issue small credit limits when dealing with a first-time credit card user. Limits gradually increase, and this increases the danger of accumulating excessive debt. Too much debt not only takes a chunk of disposable income each month, but students risk maxing out their credit cards and being unable to pay down balances. Debt can follow students post graduation, and lower their FICO credit score.

Benefiting the most from credit cards as a college student involves making wise choices. Acquiring a credit card in your name isn't a pass to buy whatever you want. The more you purchase with the card, the more you have to repay. Rather than let balances accumulate from month-to-month, start off on the right foot and eliminate balances each month. In other words, only charge what you can payoff within 30 days. This method greatly improves your payment history which ups your credit score, and you avoid high credit card balances.