8 Steps to Boost your Credit Score Before — and After — Graduation

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It’s never too early to get a head start on your credit.

In fact, if you’re in college or have recently graduated, this might be the perfect time to start building your credit history and make sure you’re on a solid financial path.

Read on for tips on how to boost your credit score both before and after you graduate.

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Tips to boost your score before graduation

Whether you already have a credit history (and therefore a credit score) or not, college is a great time to set the foundation for your financial future.

These are some steps you can follow:

Get your credit report

Even if your credit history is short or brand new, the first step to good credit management is to check your credit report.

There are two main reasons for this: First, it’s important to know what is being reported about your financial history and second, you’ll need to ensure that the information it does contain is accurate.

This is especially true if personal information, such as your Social security number or login credentials, has been compromised in any sort of data breach. Looking at your credit report can help you spot any identity theft signs — for example, accounts that don’t belong to you — that might hurt your score down the line.

You can get your credit report for free from all three major credit bureaus (Experian, TransUnion and Equifax) through AnnualCreditReport.com. These don’t include a score; however, if your credit history is very short, you might not have a score yet anyway.

If you do have some credit — for example, you have your own credit card or you’re an authorized user on another person’s credit card — you probably do have a credit score and there are several ways you can check it. For one, you can buy a report from one of the credit bureaus or from FICO, one of the two major credit scoring models directly. You can also check with your bank or credit card issuer as most major financial institutions provide credit reports to their clients for free.

Pay your bills on time

There are two major credit scoring systems: FICO and VantageScore. While they calculate scores slightly differently, payment history is, by far, the most influential factor in both.

Not all your bills are reported to the credit bureaus — only credit accounts such as loans and credit cards are reported every month. However, if you were to fall behind on utilities, cell phone payments or cable, for example, your account could be sent to collections, and this would be hugely damaging to your score.

Make sure to set up reminders for your bills or, if your finances allow it, enroll in auto-pay so you don’t miss a payment.

Consider a student or secured credit card — but pay it off every month

In order to boost your credit score, you have to show a history of responsible credit usage. Some good ways to do that are with a student credit card or a secured card.

Because they’re tailored for borrowers with little credit history, these cards have more lenient credit requirements but still offer plenty of rewards in the form of cash back or miles.

Both student and secured cards — cards that require a security deposit up front — tend to have much lower credit limits than traditional cards, but these can be great credit-building tools as they help you create a history of on-time payments. They can also increase your available credit, which helps boost your credit utilization ratio, an important factor in your credit score.

However, it’s important to pay off your balance in full every month to avoid high interest charges and keep your utilization percentage low. Maxing out a card and only making the minimum payment will impact your credit score negatively and can, ultimately, trap you in a debt cycle that is difficult to get out from.

Become an authorized user on a family member’s card

If you can’t get a student credit card, and you have parents or guardians with good credit, you could ask them to be an authorized user on their card.

It’s extremely important, however, that the person that adds you as a user has a great track record of on-time payments, as activity on the card will be recorded in both your credit histories.

Limit your borrowing

Given the sky-high prices of tuition across the country, student loans have become a necessity — and often a huge financial burden — for millions of Americans.

While you might not be able to avoid borrowing altogether, it’s a good idea to limit just how much you borrow. This will make your future monthly payments more manageable, giving you some financial freedom and reducing the chances of not being able to pay your loans on time.

Here are some ways to reduce your borrowing:

• Fill out the FAFSA every year. The Free Application Free Application for Federal Student Aid (FAFSA®) isn’t only needed for loans. Millions of students also qualify for federal grants and work-study programs — both of which could help you reduce the amount you borrow.
• Apply for scholarships. There are thousands of scholarships available for a wide variety of students, and not all require an exceptional GPA or outstanding athletic talents. There are scholarships based on ancestry, interests, place of birth, religion, among many others. You can look through a number of online directories to find a good match for you.
• Get a side hustle. First, it’s important to find out if you qualify for a work-study program. If you don’t qualify for work-study, most college towns will have plenty of student-friendly jobs with flexible hours. These could help you earn some income, reduce your borrowing and give you some work experience along the way.

Tips to boost your score after graduation

Once you graduate, you’ll have even more opportunities to improve your credit score — especially once you find employment.

Continue to monitor your credit

Now that you’ve graduated — and that you’ve hopefully built up some credit along the way — it’s time to get your credit report and see where you stand. You could also sign up for a credit monitoring service, which not only helps you keep an eye on your credit report, but will also send you alerts if anyone tries to use your information to open fraudulent accounts.

Choose your student loan repayment plan carefully

Most federal and private loans will grant you a grace period of six months after school ends before you have to pay — and a variety of repayment options once you do.

Make sure to review the available repayment options carefully. Many people who are just starting out in their careers choose some sort of income-driven repayment (IDR) plan, which adjusts your monthly payment to how much you’re earning.

If you find a job with consistent income within that grace period, it’s a good idea to enroll in your lender’s auto-pay plan. This not only ensures that you don’t miss any payments, it could also snag you an interest rate deduction of anywhere between 0.25% to 0.50%. A rate discount, even if small, reduces the amount of interest you pay over the life of the loan, saving you money and speeding up repayment.

Don’t close your credit cards — and upgrade if possible

Once you graduate, your credit card issuer might upgrade your student credit card to a traditional card, others might leave it as is. Whether it’s upgraded or not, however, it’s important to keep that account open as closing it might impact your score negatively for a couple of reasons.

First, there’s credit age, which is calculated by averaging the age of all your open accounts. The longer your credit age or history, the better for your score. It would also impact your credit utilization ratio, that is, the percentage that shows much of your available credit you’re using. Closing your oldest card would decrease both your credit age and your amount of available credit, which could hurt your score.

Instead of closing that one, once you find a job, it could be time to upgrade to a traditional credit card, which will offer higher credit limits and generous rewards.

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8 steps to boost your credit score before and after graduation FAQ

What’s the best way to establish credit?

The best way to establish credit is by applying for credit products tailored for borrowers without a credit history, such as secured credit cards or credit-builder loans. Secured credit cards typically require a security deposit which also, in most cases, serve as your credit limit. (If you’re a student, you could apply for a student credit card instead.) Credit-builder loans work more like a “lay-away” loan — instead of receiving funds up front, these are placed in a savings account. You’ll make payments every month and the funds are released once you pay it off completely. Both of these alternatives help you build credit as lenders will report your payment history to the major credit bureaus.

What credit score do you start with?

Are there credit cards for building credit?