In a galaxy not so far away (right here in America), there is a powerful force that can shape your financial destiny: your credit score. Train wisely and use it carefully, and build a future worthy of loans, apartments, and even jobs. But give in to temptation - reckless spending, missed payments, and debt - that leads to the Dark Side.
Build your credit history: Using a credit card and paying it off on time helps establish a strong credit score.
Earn rewards: Many student cards offer cashback or points for everyday purchases.
Emergency backup: A credit card can be a lifesaver in unexpected situations.
Learn financial responsibility: Managing a credit card teaches budgeting and self-control.
High-interest debt: If you don’t pay your balance in full, interest charges can pile up fast.
Overspending: It’s easy to spend more than you can afford when it doesn’t feel like “real” money.
Credit damage: Missing payments or maxing out your card can hurt your score for years.
Stress and anxiety: Debt can quickly become overwhelming if not managed carefully.
Pro Tip: Always pay your balance in full and on time. Use your card like a debit card. Only spend money you already have.
In your teens and early twenties, your mind is probably on classes, friends, and maybe your next big adventure. It’s probably not your credit score.
But here’s the truth: understanding credit scores, managing credit wisely, and building your credit early can alter your destiny (not really, but let’s go with the theme just a little bit longer).
A credit score is a three-digit number (usually between 300 and 850) that tells lenders, landlords, and even employers how trustworthy you are when it comes to borrowing money. It’s like a financial GPA. The higher your score, the more confident banks and lenders are that you’ll pay back what you borrow.
Your credit score is based on things like:
Ok, you might not be applying for a mortgage tomorrow, but your credit score can affect your life in more ways than you think, even while you're still in school.
1. Student Loans
If you need private student loans, a good credit score (or a co-signer with one) can help you get better interest rates. That means saving money when it comes time to repay the loan.
2. Renting an Apartment
Landlords often check credit scores to decide if you're a reliable tenant. A low score or no score can make it harder to rent your first place.
3. Getting a Job
Some employers check credit reports (not scores – more on this in a minute) as part of the hiring process, especially for jobs in finance or government.
4. Buying a Car
Want to buy a car after graduation? Unless you are paying cash, you’ll need a loan or a lease. A good credit score can mean lower monthly payments.
A credit report is a detailed record of your credit history. It’s like your transcript. It shows what credit you’ve been given and how well you have managed it. A credit report includes:
As we said earlier, your credit score is a number and is essentially your credit GPA. The higher the number (with 850 usually being the highest possible), the better your credit or “credit worthiness”. This number is calculated based on the information in your credit report. There are different scoring models, but the FICO and Vantage Scores are the most common.
What affects your score?
To get an idea, take a look at the chart of common ranges and what grades they might equate to if this were really your GPA.
Your credit report is the raw data, and your credit score is the summary. Lenders often look at both. For example, a lender (a bank, a credit card company, or an auto dealer loaning you money to buy a car) might look at your full credit report to understand how long you have had credit and what your financial behavior is like. Your credit report tells them if you have had late payments, if you have too many credit cards, or if you have never had credit at all. They might also look at your credit score to determine your loan eligibility and interest rate.
Can You See Your Credit Report?
Yes! You can get a free copy of your credit report from the three major credit bureaus once a year at AnnualCreditReport.com. The bureaus are Equifax, Experian, and TransUnion. Different lenders may check different bureaus, or all of them, so it’s important to monitor all three.
Hint: This is FREE. You might stumble across other options on the web that want you to pay for your credit reports – either a one-time fee or a monthly subscription. These are usually services that have other features bundled in. They aren’t necessarily trying to scam you (but be careful regardless). They are most likely just trying to sell you something you might not need. Don’t be afraid to dig for the free option. It is your legal right.
Your credit report is an important tool to protect yourself from identity theft by helping you spot suspicious details early. When checking your report annually, look for loans or credit cards you don’t recognize, addresses that aren’t yours, or anything else that doesn’t line up with your actual financial history. If you spot simple mistakes, you’ll need to work with the credit bureau and/or the lender to get the error fixed. If you discover signs of identity theft, call law enforcement.
TLDR: Start as soon as you turn 18. You must be a legal adult to take on credit.
(Pssst ….. Parents, you can give your kids a little bit of a head start by adding them as an authorized user of your credit cards. But we will be blunt here: please DON’T do this if you don’t manage your credit well. Don’t saddle them with your poor financial history and habits. Also, remember that adding them as an authorized user is not the same as building their own credit history.)
Even if you're just starting out, there are smart ways to begin building your credit:
Get a student credit card with a low limit and use it responsibly.
Just having a credit card doesn’t give you a credit history. Your credit score will be based on how you use the card and how promptly you pay it off. The best way to get a good score fast is by having a low-limit credit card, charging just one or two small things on it, and then paying it off fully each month. For example, you might set up your Spotify subscription to charge automatically to your credit card, and then set up an automatic payment through the credit card site to debit the monthly payment before the due date.
Become an authorized user on a parent’s credit card.
See our note to your parents above. If your parents have good credit management habits, they can not only teach you those good habits but also let their good credit history reflect well on you. Ask them if they would be willing to add you as an authorized user. Then, respect that this is THEIR credit card and THEIR money. If you charge something to their card, make sure you have their permission and then pay them back. (Yes, the author of this article is a parent with college-age kids. BTDT.)
Pay your bills on time, including phone plans or utilities in your name.
Try our method above: Set up a subscription to bill your credit card and then set up an automatic monthly payment to pay off the balance. If you make other charges to the card, use the budget skills we teach in this series to keep track of your spending and pay off the balance in full and on time every month.
Avoid maxing out your credit card. Try to use less than 30% of your limit.
Don’t get underwater with debt early in life. Please take our advice on that.
Keep your credit card usage low and within budget so that you can always pay off the balance each month. This is about earning a good credit score – getting a good financial GPA – not about spending like an heiress on Spring Break without consequences. We live in the real world.
Be a Credit Jedi
Your credit score might seem like a master-level problem, but the earlier you start training for it, the better off you’ll be. Think of it as investing in your future self, one smart financial move at a time.
Read more about Compound Interest - How it can work for you when saving or investing money, and how it can work against you when credit card debt piles up.