Let’s be honest, credit can sound like a very overwhelming thing, and understandably so. If you make one wrong move, it can alter your financial path for a long time. I know plenty of folks — young and old — who have thousands of dollars of credit card debt.

But as a college student, I am learning why it might be important for me to have a credit card. In fact, I wish I would have had one sooner. Credit cards are one way to begin building your credit score, which then helps you access other financial products and services when you need them.

Key tips for building credit

• Start building your credit and healthy spending habits early
• Choose a credit card that fits your situation and needs
• Don’t spend more than 30% of your credit limit
• Make payments IN FULL and ON TIME

Why does a college student even need a credit card?

Given the risks involved, you might be asking yourself whether it’s worth it to get a credit card before you “really” need one. Well, as someone who just graduated from college, I wish I would have had a credit card sooner.

When it comes time to do important “adult” things, such as moving out of the college dorm and into an apartment, it is crucial to have already established your credit history. In my case, I was fortunate to have a co-signer on my lease, but I still found it very complicated to apply for apartments without having established any credit. Many landlords will refuse to consider your application without an established credit score.

By not beginning to use credit during college, I missed out on these important benefits:

• Early start to building credit score before entering “the real world”
• Establishing a healthy credit history on small purchases
• Learning the responsibility of having a credit card

How can I use a credit card to begin building my credit score?

Here are three healthy ways that I’ve discovered for college students to go about establishing credit using a credit card.

#1 get a secured credit card

The easiest way to start building credit as a college student is to get a secured credit card. This type of card is available to just about anyone over age 18, regardless of your income or credit history. When you apply for a secured card, you deposit money in an account (usually $200-$1,000) in an amount equal to your credit limit. The amount you deposit serves as security for the credit line. If you don’t make your credit card payments, the company can take this money to cover your balance. But if you use the card responsibly for a year or more, including making timely payments and keeping the balance low, you can often upgrade to an unsecured credit card, which offers more flexibility and higher credit limits.

#2 get added as an authorized user

If your parent or guardian has good credit, ask them to add you as an “authorized user” on their credit card. This can help you build credit history while also keeping you accountable to someone else who sees your spending habits. Not only will you establish a strong credit score, but you can learn financial responsibility when you have open discussions about credit and money management with your family. Just be careful not to take advantage of your parent’s generosity; if you do not use your card wisely, you can harm your parent’s credit score, saddle them with your debts, and damage your family relationships!

#3 apply for your own basic credit card

You may also qualify for a regular credit card while you’re a college student, but make sure to look for one with no annual fee. These cards often have age or income restrictions, making it difficult to get unless you are over age 21 or have a regular income or a co-signer. These cards will generally have a higher credit limit, allowing you to use them for larger purchases or for travel, but it comes with the responsibility of managing your income to pay off these purchases quickly so that you don’t end up in debt. If you are under 21 or don’t have a regular income, this type of card may not be the best choice for you.

How do I choose the right card for me?

Always do your research and compare options before you sign up for a credit card. Make sure that you avoid cards with an annual fee! And don’t just look for cards with fancy rewards. This can create a fast track to credit card debt, if you’re tempted to spend more than you can afford to repay. Many cards — even secured credit cards — offer a flat rate cash back reward of 1% or more. Some offer higher cash back rates for certain types of purchases, such as gas or groceries.

Here’s a great place to start comparing secured credit cards: https://www.creditkarma.com/credit-cards/secured-credit-cards

How should I use my credit card to build my credit score?

In order to build your credit score, it is important to keep your credit utilization low. Credit utilization is a piece of information that represents how responsible you are with your credit. It is calculated by adding up all of your credit card balances and dividing by your total credit limits on all cards.

For a good credit score, you want to keep a credit utilization rate below 30%. In practice, this means that if you have a card with a $500 credit limit, you should never spend more than $150 on the card per month. Maxing out your credit limit, or even using up more than half of your available credit, will cause your credit score to drop.

Most people with excellent credit (score > 800) have a credit utilization ratio of less than 10%! If you’re just starting to build your credit, this might look like using your credit card once or twice a month when you buy gas (less than $50 total) and not for any other purchases. Put simply, the lower your credit utilization rate, the higher your credit score will be.

Here are a few other ways to keep your credit utilization rate as low as possible:

• Make your payments on time and in full, so that you don’t increase the balance on your card.
• Don’t close any unused credit cards; they keep your total credit limit higher.
• Request a credit limit increase, if you qualify (but don’t increase your spending).

What if I’ve already messed up my credit?

Maybe you’re reading this and thinking, “Wow, I wish that someone had told me all this sooner… I’ve already got trouble dealing with my credit card debt!” You are not doomed to have bad credit forever! And believe me, you are NOT alone. There are lots of folks experiencing this kind of financial struggle, in Arkansas and across the country.

If you or someone you know is struggling to build their credit, join us for one of our FREE workshops this summer at the Faulkner County Library in Conway, AR. Anyone is welcome to learn more with us about credit and how to improve your financial situation! Click the link below for more information about our upcoming financial literacy workshops and events.