Student Credit Rating

More than 80 percent of students had a credit card in 2008, so the majority of college students have a credit score, according to Sandra Block of USA Today. A 2009 credit card law makes it more difficult for college students to obtain credit, but not impossible. Because college students tend to have the least experience managing credit, it is important to establish a good credit score early in life so they can acquire loans needed to obtain big-tickets items after college.

Identification

To obtain a credit rating, a student must have at least one line of credit or loan. Borrowers do not have a "starting" score. Once the borrower attains enough history on an account -- usually six months -- the credit bureaus can give him a credit score. Although a short borrowing history tends to work against a score, this is not always so with young borrowers. The FICO model compares new borrowers only to other new borrowers, instead of to people with longer histories and better repayment habits. Thus, young borrowers often have high scores if they have no negative data on file. However, a young borrower's score usually drops once the bureaus lump him in with borrowers who have a lengthy credit history.

Importance

Even when a student does not plan to use credit for a while, it may help to start building credit as soon as possible. After college, the student might want a mortgage for his first home or an auto loan. Credit scores also can impact an individual in matters unrelated to credit. Employers often check a person's credit before hiring him, and a low credit score may prevent getting certain job perks or duties, such as acquiring a business credit line from the employer to rent a car.

Tip

Parents should help students manage their first line of credit. Some common pitfalls include maxing out a credit card (using all the credit available) and paying late. A maxed-out credit card can cost several dozen points, according to Bankrate, especially if the borrower has above-average credit. Any delinquency, even a single late payment, remains on a credit report for seven years. So a mishap during a freshman year can cause headaches well after graduation.

Warning

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 -- also known as the Credit CARD Act -- prevents creditors from approving lines of credit to borrowers under age 21 unless he can prove an income or a parent cosigns on the account. This is meant to protect college students from predatory lending and damaging their credit score. If the student cannot get an unsecured card on his own, he can try to obtain a secured credit card account. This requires a security deposit, so the student cannot spend more than what is in the account. Secured cards report to the credit bureaus, so the student must still pay his bill on time, or he will damage his credit. If he makes timely payments, however, the secured credit card can help his credit rating over time.