Upperclassmen know what the first month back to school means: finding a place to live off-campus next year. However, students don’t usually realize that this process must be started at least one year prior.

To lease an apartment, you must have prior credit history for the landlord, or else someone must co-sign the lease.

According to the MSN Money Web site: ‘The fastest way to establish a credit history can be to ‘borrow’ another’s record, either by being added to a credit card as a joint account holder or by getting someone to co-sign a loan for you.’ If a student’s name is signed onto the loan, as well, good payments will be a positive reflection of the borrower.

Step 1 – Research

Credit, as the Federal Trade Commission states, is a mathematical formula derived from payment history on bills, the number of accounts, outstanding debt and how long an account has been active. A number is made up from there, producing a credit score. This score determines if someone will qualify for anything from loans to credit cards.

Once able to qualify for a card, whether from having a steady job or successfully maintaining an account or smaller card, the most important thing to do is: research.

‘Many banks and companies will offer you cards and prey on you, but just pick one – just one for a student,’ said Margrit Bharvar, the vice president and senior premier relationship manager of HSBC Bank USA in Great Neck, N.Y. ‘Manage it, and after two years, when you learn to manage it, get more. Later on, have two or three.’

She also said that although a student will have a limit, usually between $500 and $1000, if he or she can manage it for six months they eventually will get calls to increase the line of credit.

Online is another good place to start. Most companies, including American Express, MasterCard, Visa and more, have Web sites that outline the parameters of their multiple options. A card should have three things: a low or 0 dollar annual fee, a low interest rate (comparably) and the best rewards possible. Many cards, such as American Express Blue Sky, have all three.

Step 2 – Apply

According to MSN Money, it’s ideal to start around age 18 but also important to start small – sometimes even with a credit card that will only work at a department store. These stores run on a much smaller scale, and because they are in-house and only work within the chain, they are more likely to lend students the credit line with the hope that they will get more business.

For example you can apply for instant credit online at Target.com. Once approved for a credit card, it’s important to make payments on time, even if it’s just the minimum balance, for an entire year. According to the Fair Trade Commission’s Web site, bill payments and late payments affect your credit. Being on time builds your credit score number, which credit card companies base their approval on, and increase the chances of qualifying for a big-name card. Just be careful: Usually, if the balance isn’t paid in full, these cards tend to have a higher interest rate on remaining balances.

Credit card companies also look for any type of history, including bank accounts. Having an active checking or savings account is a huge asset. Having a cash-flow going in and out of these accounts is even more important, as is responsibly using a debit card.

Apply through a bank

Maintaining a good relationship with banks is also a good way to start credit since many card companies offer credit cards through banks. Companies such as MasterCard give out credit cards through financial institutions, such as banks, instead of on their own. Good relationships will help to earn a card offer though a bank.

For 12 years now, MasterCard has had a campaign called ‘Are You Credit Wise?’ which senior account executive Jess Dillman explains is a peer-to-peer literacy program.

‘We hire and train student interns to lead financial literacy programs on their campuses. … This year, we hired 12 interns, at schools across the U.S., that are leading their own campaigns on money-management information, budgeting, and credit cards through a grassroots campaign,’ Dillman said.

Secure credit card

Another option for new customers is to apply for a secure credit card. These cards are similar to debit cards. They require a deposit of money, which is then used as the credit line. This is just a deposit, but if payments are made in full each month, the deposit money will usually be returned after about a year. However, if the borrower defaults or is late on a payment, the amount will be deducted from the deposit money.

Do research. Start small, and build yourself up. Get one solid credit card and maintain it. Don’t be suckered into companies that take advantage. Be smart, and soon it will be second nature.

schoen@syr.edu

Published on September 20, 2009 at 12:00 pm