4 Ways for College Students to Build Credit Without Going into Debt

Lamine Zarrad
September 27, 2022
5 mins

Whether you’re juggling a full class load, hunting down a part-time job, or simply getting used to doing your own laundry – student life can be daunting. 

Credit-building? It’s probably at the bottom of your "adulting to-do list". Things like home ownership, upgrading your old beater, or opening a business may seem a long way off. But when you’re ready to pursue these financial milestones, good credit can help you get there.  

It takes time to establish a strong credit history, which is why it’s smart to start while you’re still in school. But if you’re on a student budget, or you’re not sure what salary you’ll make in the future, you might be hesitant to take on new debt just to build credit.  

Luckily, with these four methods – you don’t have to. 

1. Plan ahead for student loan repayment 

A college degree can unlock a world of exciting professional opportunities. It’s also an incredibly expensive endeavor, and around 65% of graduates enter the workforce with some degree of student debt. Your student loans can be a powerful credit-building tool, but it’s important to plan ahead.  

Many students choose to defer their student loan payments while they’re still in school. If your loans are deferred, they’ll show up on your credit report, but they won’t help or harm your score. Depending on the loan, you may or may not accrue interest during this period. 

Making loan payments while you’re still in school can help ease financial pressure when you graduate. Whether you’re paying down your principal, or simply keeping your interest from racking up, you’ll set yourself up for smaller monthly payments down the road. 

Here are a few other helpful tips to set yourself up for success when it’s time to pay your student loans:

  • Only borrow what you need. It can be tempting to take out an extra $1,000 here or there to cover rent or a new computer. But these costs add up and can make repayment less manageable in the future. 
  • Apply for grants and scholarships. You can save thousands of dollars on student debt by supplementing your loans with grants, scholarships, and work-study programs – so do your research! 
  • Make responsible payments. Once your deferment period ends, pay your loans in full, and on time every month. Student loan repayment can have an outsized impact on your credit history, as they’re often one of the only accounts on young folks’ credit reports.

Learn More: How Do Student Loans Affect Your Credit?

2. Become an authorized user

It can be tough for students with no credit history to get approved for traditional credit offers. That’s because there’s simply no way for lenders to know you’re a responsible borrower. One way around this? Piggyback off someone else’s credit. 

If you have an adult in your life with strong credit, they can make you an authorized user on their credit card. As an authorized user, you’ll get your own card and have access to the line of credit. More importantly, the account will show up on your credit report.

You don’t have to use the account for it to benefit your credit score. Authorized users aren’t legally responsible for making payments, but all account activity - good or bad - will affect your and the primary cardholder’s credit. Make sure both parties feel confident with the arrangement before becoming an authorized user – and set clear expectations for spending and repayment.

Learn More: Adding an Authorized User? Read This First

3. Open a student or secured credit card - with CAUTION

Many credit unions offer student credit cards. Student cards may have fewer requirements to open - but they usually come with caveats: high interest, and high temptation to max-out your balance.

“Secured” credit cards are another credit-building option. These starter cards require an up-front security deposit (usually equal to the card’s credit limit). You'll have to front some cash - which can reduce the amount you have handy for emergencies. Additionally, you'll pay interest to borrow your own deposit back. With other options available (see #4), a secured card should only be used with extreme caution.

Learn More: Are Secured Credit Cards Good for Building Credit?

Credit cards of any type add a bill to your monthly expenses. As a student, it’s important to watch your spending and only buy what you would have anyways. This way, you’ll build credit without racking up additional debt.

Check out these personal finance resources by StellarFi to learn how to budget, save money, reduce your expenses – and more. 

A few tips for using a student or secured credit card:

  • Keep your balance low: It’s harder to pay off your full balance each month if you consistently max out your credit card. Minimize your spending to avoid incurring interest on your debt. (It’s also better for your credit score!) 
  • One card is enough: Opening a credit card in college can improve your “credit age” down the road. But if you’re on a tight budget, keep it to a single card so you don’t spend more than you can afford. 
  • Pay on time: Repayment history is one of the most important factors in your credit score. Get clear on your card’s billing schedule to make sure you never miss a payment or pay late. (Some cards even offer a small discount for auto-pay.)
  • Perks are just perks: Don’t apply for a credit card to get a free item or sign-on perk. Make sure you actually want the card first by researching annual fees, interest rates, and how it compares to other offers. 

For many young folks, a student or secured card is their first experience using credit. These tools can help you get comfortable borrowing, but it’s important to use them wisely – otherwise, you could end up doing serious damage to your credit score.

This blog takes a closer look at how to build credit fast and avoid common credit pitfalls.  

4. Build Credit with Your Monthly Expenses

Establishing a credit history is an important part of the transition to adulthood. But some credit-building methods can backfire if you’re not prepared, and others may feel inaccessible if you have fewer financial or social resources. 

Now, anyone can build credit without taking on more debt (or adulting). With StellarFi, you can turn your monthly expenses into credit builders. The process is simple, and improves 100% of the factors that affect your credit score

How it works: sign up and link recurring bills like your rent, student parking pass, and even your Netflix payments. StellarFi operates behind the scenes to your bills on your behalf, and reports your positive account activity to the credit bureaus when you pay us back. 

The best part? There’s no credit check, no security deposit, and we’ll never charge you surprise fees. 

Student life comes with enough learning curves. StellarFi helps you start building credit automatically, so you can focus on building your future. 

Take a look around and become a StellarFi member today!

The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.

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On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score. StellarFinance, Inc. will report your on-time payments to Experian®, Equifax® and TransUnion®. Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.