Published March 12, 2024
4 min read
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Key points about: College student credit scores
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Financial habits, such as payment punctuality and credit utilization ratio, significantly impact their credit scores. Timely payments and low utilization can lead to a positive credit history.
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Students often face the challenge of having a limited credit history, which can affect their initial credit scores. However, student credit cards and secured credit cards offer a pathway to start building credit despite this limitation.
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College students can begin building their credit scores early by responsibly using a credit card, which is crucial for future financial activities like renting an apartment, buying a car, or obtaining a mortgage.
Understanding good credit scores for college students is important as it marks the beginning of financial independence and responsibility. A credit score is a number that represents your creditworthiness and is especially important as you begin to navigate the world of financial decisions. A good credit score for a college student typically ranges from 670 to 739, aligning with standard credit rating bureaus' definition of a "good" credit score. This average credit score for college students is similar to the average credit score for American adults, which is 716.
This score can impact your ability to obtain credit cards and student loans and may even affect renting apartments. For college students, building and maintaining a good credit score is a key step toward establishing a solid financial foundation for the future. If you’re a college student with a score in the 670-739 “good” range, you’re doing quite well in managing your credit, especially if you have limited credit history and lower income levels.
Factors influencing student credit scores
Credit scores are affected by a variety of factors, each contributing to how creditworthy you appear to lenders. Credit score ranges typically range from 300 to 850, depending on the scoring model. Your credit score is calculated based on your past financial activity, such as your payment history and credit utilization ratio. Understanding these categories can help people, especially college students, manage credit more effectively.
- Payment History (35% of credit score): This is the record of how consistently you make payments on your debts. Late or missed payments negatively impact your score, while a history of on-time payments can improve it. This is the most influential factor because it directly shows how reliable you are as a borrower.
- Credit Utilization (30%): This measures how much of your available credit you are using. A lower credit utilization ratio is better for your credit score. It’s suggested that you use less than 30% of your limit. For instance, if your limit is $1,000, try not to spend more than $300. High utilization can flag creditors that you may rely too much on credit, which is a risk factor.
- Length of Credit History (15%): This considers the average age of your credit accounts, including the age of your oldest and newest accounts. A longer credit history typically leads to a higher score, as it provides more information about your spending habits.
- Credit Mix (10%): This represents how diverse your credit accounts are, such as credit cards, student loans, and auto loans. A mix of different types of credit can positively impact your score, showing that you can manage various types of credit responsibly.
- New Credit Inquiries (10%): Every time you apply for a new line of credit, a “hard inquiry” is made, which can slightly lower your score. Frequent inquiries in a short time can be a red flag for lenders.
Earn top-tier rewards and build credit history1 with a Discover student credit card
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How credit scores are calculated?
Credit scores are calculated using a formula that considers various aspects of your financial history. Every time you open a line of credit (such as a credit card or loan), this financial information is collected, analyzed, and reported to the three credit bureaus:
- Equifax
- Transunion
- Experian
While the specific formulas used by each bureau differ slightly, they all generally focus on similar characteristics. How students manage these various types of credit plays a significant role in determining their overall credit score. As a student, your credit scores will be most impacted by a history of on-time payments, which is why paying bills on time is important.
If you’re new to credit, there are a few things you can do to get started. One thing you can do is apply for a credit card that’s aimed at new users, such as a secured card or student credit card.
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Building a good credit score as a college student
Learning how to build credit as a college student is one of the most important financial skills you can learn. A good credit score for college students can be built by:
- Obtaining a student credit card
- Becoming an authorized user on another credit card
- Take out a credit-builder loan
- Paying student loans on time
And if your credit card issuer reports your account activity to a credit bureau, student cards let you build credit with responsible use1, like making on-time payments and keeping your card balance low. Student credit cards are designed specifically for college students and don’t usually require a credit score to qualify. This likely makes them the most appropriate credit card for students with no credit history. For example, there’s no credit score required to apply for Discover student credit cards.2
How student credit scores impact future opportunities?
Having a good credit score after college is important. It helps when you need to borrow money for major things like a car or a house. Banks and lenders are more likely to provide and offer loans with lower interest rates if you have a good credit score. It's also factored in when it comes time to rent apartments and sometimes even get a job, especially if it involves managing finances.
Building your student credit score is just one way of developing good financial habits. Students should take advantage of resources that teach them financial skills that set them up for long-term success. After all, college is short, but financial literacy can last a lifetime.
