Avoiding Debt While Building Credit: Why it’s Important in High School and College

There are a number of great ways to build up your credit score as a college student without taking on huge amounts of debt. This is something important to consider even before going to college because it can impact your ability to receive scholarships and aid, especially loans.

You definitely want to start saving your money in a savings account, and you definitely want to start building credit as soon as possible. Follow some of the hints below to see what will work best for you.

Build credit without debt by paying bills. By paying utility bills in your name, or even holding a life insurance policy, you can build credit without a credit card. This can be good for those who may not be able to obtain a credit card either because you are too young or don’t qualify without a steady income (depending on the card you want).

Open your own checking account separate from your parents. It doesn’t hurt for one of them to be listed on the account, especially if you are not old enough to have your own. Some banks allow you to have a checking account as young as 14 or 15, but many banks won’t allow it until you are at least 18. Having your own account will allow you to track what you save and what you spend, as well as give you some financial independence.

money-card-business-credit-card-50987Establish financial independence in high school (or as early as possible). Like I said, you want financial independence of some kind before you go to college. A big part of learning to manage your finances and build credit is understanding your finances. The best way to learn is to try it out for yourself. When you get a fee for overdrawing your account (which you will have to pay immediately), or if your card is declined for being overcharged, those financial lessons will stick with you more than your parents’ money talks. Not everybody struggles with money management like that, but experience is the best teacher. When you reach college, your loans will most likely be your responsibility so you want to make informed decisions.

Don’t overdraw your account because this could land you in hot water with the bank in more ways than one. I know I said experience is the best teacher, but for those who are already pretty good at managing money, you should be able to plan enough in advance to avoid this. Most accounts require a minimum balance, so you could still overdraw even if $200 is still in your account. I had an account with a $350 minimum once, but I switched to a student plan to avoid minimums. Your account balance is important when filing for a credit card, as is your record at the bank.

Look for student credit card plans because they are usually a really good bargain, especially when sponsored by your bank. I am on a credit card with my dad for convenience. I use it for books and school expenses that he helps me pay off, so this is why it works for me to not use a student card. Two of the best reasons to get a student card are the low credit limits and the low interest rates. They are designed for people with low incomes and little experience with credit. You will still have to pay interest, but it is impossible to rack up more than a few hundred dollars in debt at a time.

Open a store credit card, but only pick one. Choose Old Navy, Macy’s, Belk, or something similar. This will build credit for you and allow you to save on your school/work wardrobe. Use it responsibly and make your payments on time, and you will find this a beneficial resource. Stores like these will hand out cards to young adults to target them for business, but over-committing to these types of cards will actually hurt your credit. Only keep 1-3 credit cards total if you can, and try to keep less if you have a minimum wage job (like work study).


Don’t be swayed by fancy credit plans because credit is credit, and no one cares what type of card you have as long as you make the payments on time. The same good credit accumulates whether you pay your utility bill on time or if you have some sort of platinum-gold-rewards-airline miles-high interest rate-all the rage-card.

Don’t be afraid to cancel credit cards if the responsibility is too much for you. There is no shame in setting firm boundaries for yourself, especially where money is concerned. Be sure you have enough money to pay off your cards and close them at your convenience. You will never have to worry about your credit score if you keep your balance paid.

Be cautious with college loans because they will effect your credit. Missing payments or walking away with huge debt and massive interest accumulation will result in difficulty when you’re trying to buy or lease a house after graduation. Private loans can be detrimental to your personal financial situation because banks will most certainly take advantage of you. Loans are helpful, but be wary of using your college loans for anything other than tuition. They allow their use for any school expenses, but this can trap you into debt you could easily avoid.


One thought on “Avoiding Debt While Building Credit: Why it’s Important in High School and College

  1. As a accounting major and someone truly interested in managing money, I can agree wholeheartedly that all of these suggestions will work in order to build your credit. Keep in mind that once you turn 18, you are legally considered an adult, so medical bills (such as those that come from visiting the ER) will automatically be filed under your name and you will be held responsible for paying those bills. If they are not paid, this is one reason why you might be declined to have a credit card.


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