Building Credit as a College Student or Military Recruit

a young adult works on homework in their dorm room

Building credit in college isn't just smart; it's a step toward financial independence. And while navigating credit cards might seem like a future concern (perhaps after graduation), you can actually qualify for a card as early as 18 years old. Starting your credit journey now means you will have freedom to make your own financial decisions without relying on a parent co-signer. Wondering how to start credit-building? Keep reading while we simplify credit basics, highlight its importance, and guide you in building your credit score. Plus, we found a perfect secured credit card for college students and military recruits.

Credit Score Definition

A credit score, ranging from 300 to 850, acts as a report card for your spending activity. This score helps lenders evaluate the likelihood of a borrower in repaying money. It makes sense—why lend money if there's a high chance it won't be repaid? The higher your number, the better your credit score. Elements shaping a credit score include payment history, credit utilization ratio, mix of credit types, recent credit applications, and length of credit history. Much like a military service record, your credit score evolves as your credit report changes.

Why Should College Students and Military Recruits Care About Credit Scores?

Taking the initiative to build your credit during college is a savvy move. An important advantage of having a credit card during this time is the potential to graduate with a positive four-year credit history. But why does this matter? Your credit score plays a pivotal role in significant life milestones—buying a car, securing a job, renting an apartment, or even owning your first house. A great credit score is your pass to smooth approvals and better rates on everything, which could save you thousands of dollars!

Dig deeper into the impact of credit in our previous blog: Top Reasons Why College Students Should Start Building Credit.

Strategies for Building Credit

While there are several approaches to boosting your credit, here are the most important methods for college students and military recruits:

1. Pay On Time, In Full

Establishing and sustaining a solid financial track record, coupled with timely credit card payments, stands as the foundation for building your credit score. In fact, your payment history accounts for 35% of the total score, and it reveals your ability to manage credit responsibly. Any missteps, such as a missed payment or failing to meet minimum balance requirements, are flagged and reported to credit bureaus, leaving a lasting impact on your credit report. Meanwhile, consistently meeting your payment deadlines can greatly elevate your credit score.

Using credit wisely also involves making purchases that you can comfortably repay in full. For college students and military recruits, it's smart to begin with smaller expenses, like meals and car fuel. That way, you are easily building credit without having a shortage of funds.

PRO TIP: Set a monthly alarm or notification to remind yourself of upcoming credit card payment deadlines. This ensures you remain proactive in meeting your payment obligations.

2. Smart Credit Utilization

As mentioned earlier, your payment history plays a crucial role in determining your credit score. Another significant factor is credit utilization, which assesses the ratio between the credit you have available and the credit you are actually using.

While some people believe that frequent credit card use is the key to improving your credit score, the reality is different. It's not about accumulating high numbers but maintaining consistent activity. Experts advise keeping your credit utilization ratio below 30% of your total available credit. For instance, if your credit card has a $3,000 limit, it is recommended to use no more than $1,000 at any given time. Finding this balance ensures that you manage your credit effectively, contributing positively to your credit score.

3. Monitor Your Credit Statements and Reports

Regularly keeping tabs on your credit card statements and credit reports is an important way to sustain a strong credit history. For one, reviewing your monthly statements will help you spot any irregularities or suspicious charges that might lead to credit setbacks. If you notice anything unusual, quickly report it to your bank to reduce the risk of your account being compromised. Failing to report incidents promptly may result in your account reaching its limit, negatively impacting your credit score due to someone else's misconduct.

Furthermore, it's a good idea to review your credit report annually. Thanks to federal regulations, you are granted a free annual credit report from major credit reporting agencies (Equifax, Experian, and TransUnion). This report gives a thorough overview of your financial status, providing valuable insights to help you make necessary improvements for the future.

4. Don’t Apply for Multiple Cards at Once

Steer clear of applying for multiple cards at once—it's not a wise move. Once you've gotten the green light for your first credit card, the temptation to apply for another might kick in, but don’t do it. Why? Well, it is a red flag when potential lenders see simultaneous applications for several cards because it signals desperation for credit and indicates potential risk or financial instability. These qualities are not exactly appealing to lenders. On top of that, every credit card application triggers a hard inquiry on your credit report, which can temporarily lower your credit score. Our advice for college students is to choose a more practical approach: stick with one secured credit card.

5. Open a Secured Credit Card

If you are a student or recruit without a credit history, secured cards are uniquely designed for you. They are tailored for credit-building and offer accessibility without the fear of overspending.

They function similarly to a debit card, backed by a cash deposit that sets your credit limit. Your spending is restricted to the money you have already deposited—picture it like this: a $300 deposit equals a $300 credit limit. However, if you fall short on your bill, your bank can take the owed amount from your deposit. Unlike debit cards, activity from secured credit cards is reported to credit bureaus, giving you well-deserved credit for positive financial behavior, which impacts your credit score greatly.

Making small daily purchases with your secured card becomes a savvy strategy to boost your score, setting the stage for access to unsecured credit cards down the road.

Building Credit at Armed Forces Bank

Let's set sail on your credit journey! Whether you are a beginner or looking for a score boost, your dependable ally is a secured credit card. Practice smart credit habits like on-time payments, low credit utilization, regular credit report check-ins, caution of suspicious activity, and a smart one card approach. So what is that perfect card for college students and military recruits? The Armed Forces Bank Credit Builder Secured Visa® Credit Card is a standout choice.

Why choose Credit Builder?

  • Tailored credit limit, flexible from $300 to $3,000
  • Reporting to the major credit bureaus for an accelerated credit history build-up
  • No annual fees, application fees, or over-limit fees
  • Enjoy quick online transactions with the ease of Visa® Checkout

To apply for Armed Forces Bank’s Credit Builder Secured Visa® Credit Card, all you need is a driver's license or government-issued ID, social security number, date of birth, email address, and current home address. Start crafting a stronger credit profile today!

Member FDIC

Subject to credit approval. Transaction and Penalty fees apply.  Credit Builder Savings account required. $5.00 quarterly fee charged to the Credit Builder Savings account if not enrolled in eStatements. Improved credit score is not guaranteed. Credit score is determined by credit reporting agencies based on multiple factors, but satisfactory performance on a credit card product can improve your credit score. Default on a credit card, including missed or late payments can damage your credit score. Once added, funds cannot be withdrawn from the Credit Builder Savings account and the Credit Builder credit card without closing the savings account and the credit card.