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Preparing College Students with Financial Literacy

College isn’t just for academic learning — it’s also a great place for young people to hone crucial financial literacy skills, like balancing a budget, using credit responsibly, and regularly monitoring credit reports and scores. Building good habits around credit and finances early on can help set college students up for success and give them a head start on the road to financial independence.

Whether you’re a parent preparing to send your college kid back to school or a student concerned about paying rent and student loans, here are some financial literacy basics to help get you started: 

Why should college students have credit cards?

Learning to use credit responsibly early on helps lay the foundation for lifelong credit habits. Over time, healthy credit habits can contribute to a good credit score and help unlock key financial opportunities, like lower interest rates and better approval odds on loans. 

How can college students start building credit history?

It may be harder to get approved for a new line of credit without an established credit history, but everyone has to start somewhere. College students looking to build credit for the first time can start by:

  1. Opening a student credit card* or secured credit card

    College students with little to no credit history may start by applying for a student credit card or a secured credit card. Student credit cards are designed for students and often have more lenient approval criteria, making them accessible even for those without an established credit history. Student credit cards may offer perks and rewards tailored to students' needs, such as cashback on essential purchases or discounts on textbooks. Plus, they often have lower credit limits to promote responsible credit use.

    Secured credit cards, on the other hand, are a type of credit card that requires a cash deposit as collateral. The credit limit is typically equal to the deposited amount, making them a good starting option for young people with no credit history.

  2. Becoming an authorized user

    If opening a line of credit or applying for a credit card seems daunting, then a college student can ask a parent or guardian to add them as an authorized user on their existing credit cards. As authorized users, students can benefit from a credit card's positive history, which can help establish their credit while mitigating their personal responsibility for any charges.

  3. Get a cosigner

    Students can also consider asking a parent or guardian to cosign on a credit card. Having a cosigner can help you feel more confident in your ability to pay down your balance, but it may also limit your options for cards.

    *Important note for students under 21: The Credit Card Accountability Responsibility and Disclosure Act of 2009 does not allow anyone under the age of 21 to obtain a credit card unless a parent or guardian co-signs; except, where the student can provide independent income. This restriction applies to student credit cards. Many credit card issuers don’t allow co-signers, so an independent source of income or waiting until age 21 may be the only options available.

What are some healthy credit habits for college students?

  1. Maintain a solid payment history

    Timely payments are crucial for building and maintaining a positive credit history. They also represent a significant percentage of your overall credit score. Payment history represents approximately 35% of your FICOⓇ credit score and weighs heavily on VantageScore’s calculations as well. Making consistent, on-time payments demonstrates responsible credit management and contributes to a favorable credit score. 

    What is a VantageScore credit score?

    The VantageScore credit score model was developed by the three major nationwide credit reporting agencies, Experian®, TransUnion®, and Equifax® and is used by some, but not all lenders.

    When you fail to make credit card payments on time, credit card companies often impose late fees and penalties. These additional charges can quickly add up and create unnecessary financial strain, especially for a poor college student. Some credit card issuers even have penalty clauses that allow them to increase your interest rate if you miss a payment. Higher interest rates mean you'll end up paying more in interest on your outstanding balance, making it more challenging to pay off your debt. To help maintain a good credit score and avoid expensive penalties and interest hikes, make sure to pay your bills on time every month.

  2. Pay more than the minimum

    If possible, college students should try to pay more than the minimum payment on credit card bills each month. This can help you pay off your balance faster and reduce the amount of interest you owe.

  3. Keep credit utilization low

    College students should aim to keep their credit utilization rate low, meaning they should use only a small percentage of their available credit. A lower credit utilization rate — ideally less than 30% of the total revolving credit available to you — indicates responsible credit management and positively impacts your credit score.

  4. Avoid applying for too many cards at once

    Applying for multiple credit cards within a short period could negatively impact your credit score. That’s because having multiple hard inquiries for lines of credit on your record can cause lenders to question whether you’re capable of repaying debt. To help maintain a healthy credit score, try to be cautious and apply only for credit cards you genuinely need.

    What's a hard inquiry?

    A hard inquiry is a request to check credit, typically to make a decision about a new loan or credit card application (also referred to as new credit). A hard inquiry means a creditor requested to look at your credit file to determine how much risk you pose as a new borrower. This inquiry can stay on your credit file for up to 2 years and it will impact your credit score since most credit scoring models look at how recently and how frequently you apply for new credit.

  5. Avoid co-signing loans for friends

    Be cautious about co-signing loans for friends or roommates, as it can negatively impact your credit if the borrower defaults on payments. 

  6. Monitor your credit

    Regularly check your credit report with a service like PrivacyGuard to ensure it is accurate and free of errors. PrivacyGuard offers monthly triple-bureau credit reports and scores1 as well as 24/7 credit monitoring2 to help you keep track of any changes. 

    What makes up a credit score?

  • Payment history: 35%

  • Amounts owed: 30%

  • Length of credit history: 15%

  • New credit: 10%

  • Credit mix: 10%

How do you budget as a college student?

  1. Track your expenses

    The first step to creating a budget is to understand where your money is going. Keep a record of all your expenses, including fixed costs like tuition, rent, and utilities, as well as variable expenses like food, transportation, and entertainment. Then, consider the following questions:

    • How much money do I receive each month?

    • What are my essential expenses (rent, utilities, groceries)?

    • How much do I spend on non-essential items (entertainment, dining out, shopping)?

    • What are my financial goals (saving for textbooks, paying off student loans)?

  2. Create a budget plan

    Based on your tracked expenses, create a monthly budget plan. Allocate specific amounts to different expense categories and ensure that your total expenses don't exceed your income. If you need more help, consider using budgeting worksheets or budgeting apps. These tools can help students visualize their financial situation and identify areas where they can cut expenses or save more. 

  3. Set financial goals

    Determine your short-term and long-term financial goals. Whether it's saving for an emergency fund, paying off student loans, or funding a trip, having clear goals will give your budgeting a purpose. If you can, prioritize emergency savings. Having some money set aside for unexpected expenses can help prevent you from going into debt.

  4. Set realistic spending expectations

    Before the semester begins, discuss and agree with your parents or guardians on spending expectations to ensure clarity and avoid financial conflicts down the road. Prioritize essential expenses such as tuition, rent, groceries, and utilities, and avoid overspending on non-essential spending, like eating out, entertainment, and shopping. 

  5. Tips for sticking to a college student budget:

    • Cook at home

    • Use public transportation or carpool

    • Buy used textbooks

    • Take advantage of student discounts

  6. Avoid credit card debt 

    While it's essential to build credit, avoid using credit cards for purchases you can't afford to pay off immediately. High-interest credit card debt can quickly accumulate and be challenging to pay off.

  7. Consider part-time work

    If your schedule allows, consider finding a part-time job or freelance work to earn some extra income. 

  8. Review and adjust

    Periodically review your budget and spending to see if you are staying on track. Be flexible and adjust your budget as needed to accommodate changes in income or expenses.

How can I help protect my identity as a college student?

  1. Protect personal information

    To help protect yourself, safeguard personal identifying information, such as Social Security numbers, bank account details, and passwords. Avoid sharing sensitive information over unsecured networks or with unknown individuals.

  2. Store important documents securely

    To keep important documents safe, utilize secure storage options such as a lockbox, a fireproof safe, or a digital storage solution with encryption. Important documents may include birth certificates, passports, financial records, and academic transcripts. Shred any documents with sensitive personal information that you no longer need.

  3. Use strong passwords and two-factor authentication 

    Create strong, unique passwords for your online accounts. Include a mix of uppercase and lowercase letters, numbers, and special characters. Avoid using easily guessable information like birth dates or common words. Enable two-factor authentication whenever possible to add an extra layer of security to your accounts.

  4. Secure devices and networks

    Keep your devices, including laptops, smartphones, and tablets, password-protected and updated with the latest security patches. Install reputable antivirus and anti-malware software to protect against potential threats. When connecting to public Wi-Fi networks, avoid accessing sensitive accounts or making financial transactions. Instead, consider using a virtual private network (VPN) for added security.

If you’re a college student or parent with an existing student loan balance, then you might not be aware of scams regarding student load forgiveness. To learn more, check out Tips to help spot and avoid student loan forgiveness scams.

What next?

Watching out for identity theft can feel like a lot to handle alone — especially when you’re a college student with a full course load. Sign up for identity protection from PrivacyGuard for help monitoring changes in your personal information. 


1 Your VantageScore credit score(s) are provided by VantageScore Solutions LLC. The VantageScore model, with scores ranging from 300 to 850, was developed jointly by the three major national credit reporting agencies - Experian®, TransUnion®, and Equifax®. The version of VantageScore provided by PrivacyGuard is used by some, but not all, lenders. Your score(s) may not be identical or similar to scores received directly from those agencies, from other sources, or from your lender. Trilegiant Corporation, Trilegiant Insurance Services, Inc., Alliance Marketing Association and their credit information subcontractors shall not have any liability for the accuracy of the information contained in the credit reports, credit scores, CreditAlert® reports or other reports which you receive in connection with the PrivacyGuard service, including any liability for damages, direct or indirect, consequential or incidental.

2  Daily monitoring will notify you of certain new inquiries and derogatory information, accounts, public records, or change of address that have been added to your credit reports as reported by any of the three major credit reporting agencies. If no information has been added or changed, then you will receive a monthly notification stating that no information has changed within your credit file.