Importance of Establishing Good Credit in College

College graduates often think about buying a home after they leave college and begin to work full time. When you apply for a mortgage, a car loan, credit card or even for insurance, the company reviewing your application checks your credit report. Building a good credit score while in college enables you to borrow the money needed to buy a home or new car after you leave college.

Obtaining Credit

Traditionally, college students started to build credit by taking out student credit cards. However, federal laws that took effect in 2010, mean that people under the age of 21 can only obtain credit cards if they have sufficient income to cover the payments or if a parent or guardian agrees to co-sign on the application. Previously, students under the age of 21 could obtain cards without a co-signer or a verifiable income source.

Credit Reporting

When you obtain a credit card, the card issuer makes monthly reports to the major credit bureaus about your account activity. Your credit score consists of a credit rating by which credit bureaus grade your credit management. To receive the highest scores you must ensure you make your payments on time, and keep car balances low. If you use all of your available credit, credit bureaus assume you are having financial difficulties and your score suffers as a consequence of this.

Co-Signers

When you establish a credit account jointly with a co-signer, both of you are equally responsible for the debt. Therefore, even if you relied on your parent's income to obtain the card, card issuers score card activity in the same way as scores are formulated for people who obtained credit without needing a co-signer. Your average length of account history has a big impact on your score. Consequently, by establishing credit early you receive high scores for having long-held accounts by the time you leave college.

After College

You normally need a credit score of at least 620 to qualify for a home mortgage, but to get the best rates you usually need a score in excess of 660. Having no score and having a poor score amount to the same thing when you are applying for a mortgage. You cannot rely on a co-signer to help you obtain a mortgage because lenders require both co-signers to have acceptable credit scores. To set up cable television and other subscription services you normally need to have good credit. If you have no credit score when you leave college, you cannot set up some of the services and subscriptions that many people take for granted.