Establishing Credit with Low Limit Student Credit Cards
College students often have to face challenges associated with their newfound financial responsibility and establishing a credit score is one such challenge. The credit score is perhaps the most important aspect of a person’s financial situation, affecting everything from job applications to home ownership and vehicle rentals. Fortunately, building good credit is relatively simple for a student with a low limit credit card. The following information should help anyone build a good credit score with minimal effort and risk.
Why Low Limit Credit Cards?
Low limit credit cards are perfect for college students with no credit because they’re easy to gain approval for and they are less of a temptation than cards with higher credit limits. Credit card companies and banks are more likely to grant a student with no credit a low limit credit card, and student credit cards typically have better terms than conventional cards. Most student credit cards are given a low credit limit to minimize the risk for the issuing bank. Despite the low credit limits offered to students, account terms such as fees and penalties are far more lenient than those applied to standard credit accounts.
Establishing Credit History
After about two months of paying the monthly bill on time, the new cardholder’s credit history will begin, and all of their actions relating to debt repayments will be documented on their growing credit report. Credit reports are issued once every three months by each of the three major credit reporting agencies – Equifax, Experian, and TransUnion. With a low limit card, the temptation to spend a lot of money at once will be less, and even if the card is charged to the maximum it will be easier to repay the balance when it’s due.
Building the Credit Score
To raise the credit score as fast as possible, students should devise and adhere to a sustainable budget, while making consistent repayments to the outstanding balance each billing period. Buying small items on a regular basis, such as gas and groceries, is a great way to safely and effectively increase the credit score. Always pay more than the minimum amount due, as paying the bare minimum almost always results in a lower credit score, especially if a large balance is consistently carried over each month. The best credit scores are earned by those who keep their average monthly balance below 30% of their available credit limit.
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