As a college student, your credit score probably isn’t a priority. You’re too busy worrying about exams, homework, and scraping together enough money for a pizza on Friday night. But building good credit when you’re in college is important. It can make it easier to rent an apartment, apply for a good credit card, and buy a car once you graduate. (See also: The 5 Best Credit Cards for College Students)
Many college students graduate with no credit score at all. That’s because they’ve never used a credit card or paid off an installment loan, such as for a car or mortgage. They haven’t even started paying off their student loans yet.
Graduating with no credit makes life after college more challenging. Here are five big reasons why you should start building good credit when you’re still in school.
1. Renting an apartment
In a recent survey by national credit bureau TransUnion, 48 percent of apartment landlords said that the results of a credit check rank among the top three factors they consider when deciding to lease an apartment to a potential renter.
If your credit is bad, or if you don’t have any credit at all, you’ll struggle to rent an apartment on your own. You might have to rely on a co-signer, usually a parent, to sign the lease with you. If you can’t find a co-signer, and you haven’t built any credit while in college, finding your dream apartment, or even just a starter apartment, can get difficult.
2. Buying a car
Unless you buy a car with cash, you’ll probably have to apply for an auto loan to finance the purchase of a new vehicle. Auto lenders study your credit, too. If they find that you don’t have any history behind you, they’ll be far less likely to approve you for the loan you need to buy that new car.
Again, you might have to rely on finding a co-signer. This can be even more difficult for an auto loan. Not only are co-signers on an auto loan responsible for any payments you don’t make, the loan will also be counted as their debt. This can make it more difficult for your co-signer to apply for new loans of their own.
Overall, it’s much easier to walk into an auto dealership knowing that you already have a credit history of your own.
3. Applying for student loans
You’ll want a good credit history if you’ll need to apply for private loans to help finance the cost of graduate or professional school. It’s easier to get federal PLUS loans for graduate and professional schools with a lower credit score. However, you are limited in how much you can borrow through these federal sources.
If you must borrow more, you might have to rely on private loans. And private lenders will take a close look at your credit. If you don’t have a credit history, qualifying for one of these loans will be more challenging.
4. Being approved for credit cards
There are plenty of credit cards out there with low interest rates and valuable rewards programs. They can give you cash back on purchases or let you earn travel rewards when you use your card.
Without a credit history, and the credit score that comes with one, you’ll struggle to qualify for one of these good cards. You might instead have to settle for a basic card with a higher interest rate.
5. Getting car insurance
Not having a credit history can even make qualifying for car insurance more of a challenge. If you do want to drive, and you can no longer stay on your parents’ auto insurance policy, you’ll have to apply for car insurance on your own. And many insurance companies today look at their own version of a credit score when determining who qualifies for insurance and at what rates.
The lower your credit-based insurance score, the less likely you’ll qualify for auto insurance — and the more likely you’ll have to pay a higher premium if you do qualify.
Building a credit history
The best way to build a credit history while in college is to apply for a student credit card. These cards often come with lower limits. Some might even be secured cards, meaning that you have to make a deposit into a bank account associated with the card. This deposit makes up your credit limit. (See also: How to Use Credit Cards to Improve Your Credit Score)
Once you get a card, use it, but use it wisely. Only buy what you can afford to pay off in full each month. Then pay off your entire balance by every due date. As you generate a record of on-time credit card payments, you’ll steadily build a credit history. At the same time, you’ll start building a solid credit score, too.