Updated on 09.10.14

How to Build Credit in College

Trent Hamm

Amazon.com credit cardWhile I was reading a thread at The Consumerist on ways to get started with credit, I found myself repeatedly shaking my head at the number of extremely questionable ideas that people were coming up with.  Buying CDs and using them as loan collateral simply to improve your credit seems like financial suicide to me.

Then I came across this comment from “Eyebrows McGee”:

Incidentally, if you are going to college, you can get your first credit card and buy your textbooks on it from amazon.com. You usually save a little on the textbooks over getting them at the bookstore, amazon delivers to your door so you don’t have to carry them (important to me on a walking campus!), and you can then pay the card off right away with your books money.

By the end of four years, you’ll have some pretty reasonable credit history built up. By the time I graduated, having never charged more than $350 on the card, using it basically twice a year, and never carrying a balance, my $1200 credit limit was up to $8500 and I had enough credit history to go out into the real world of non-cosigned apartments, utilities, and eventually mortgages.

The trick, of course, is not to fall into the college student trap of abusing credit cards.

This is a brilliant idea for all new college students, in my opinion. Student credit cards used for the sole purpose of buying textbooks allow students to save money by buying their books online instead of from the campus bookstore. Plus, if you just use the card for this purpose and then quickly pay off the balance with a check, you’ll build up solid credit.

Let’s take it a step further. Let’s say you are going to buy your books from amazon.com and don’t have a credit card. Let’s also say that you’ll have to spend $350 a semester on books for eight semesters. If you apply for the amazon.com Visa, you can save $30 off of your first order. Plus, with each dollar you spend at amazon, you earn three points in the program; once you reach 2,500 points, amazon issues you a $25 gift certificate.

So, the first semester, you’ll immediately save $30 on your order. You’ll also earn 1,050 points each semester. This means that after your third, fifth, and eighth semester orders, you’ll receive a $25 amazon gift certificate that you can use to reduce the book price each semester. All told, using the amazon credit card could save you over $100 on something you’d do anyway.

The trick is to make sure that you won’t use the card for anything else. It might make sense for a college student to leave the card with their parents so that there’s no temptation to start charging things up. Then they can use the card during breaks to order their books.

If the student is capable of paying for their textbooks immediately, this is a strong way of building credit. Once you show that you regularly pay off the card, the credit card company will automatically lift your credit line, thus improving your credit score. By the time you’re done with college, not only will you have saved significant money on textbooks, but you will have also built substantial credit for yourself without any of the college student credit card mistakes.

My niece will be entering college in the very near future. She has no established credit at this point, so I think I will recommend this plan to her.

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  1. Amy says:

    That is exactly what I did – I got both a Citi card and a Discover card my freshman year and the bills were sent to my parents house. The first year or so my parents were paying for my books, so it was more convenient and safer than leaving a signed check or two with me for the bookstore. I remember my Mom even telling me to go shopping at the mall once, and to just put it on the card – Thanks for the shopping spree, Mom!

    I also used the cards to buy Christmas presents, as I knew I’d work during Christmas break and would only charge as much as I planned to make over those 2 or 3 weeks. That way I had the money up front, but was able to pay it all off when the bill came.

    By the time I graduated I had a $9,000 limit on one card, great credit, and a better understanding of “real world” finances.

  2. reulte says:

    Possibly a good way for a college student to work on a credit rating, however I would disagree with buying books with it.

    I went through numerous years of college (a double-degree, and MS except for *sigh* the thesis) and bought books only in my freshman year through ignorance. Most current textbooks are in the University library. If you’re fast or talk to the professor before the semester begins to find out which text s/he is using, you can reserve it for checkout at the beginning of the semester. Sometimes, libraries keep texts in the reference section – well, you can read/make notes in the library. I understand its a great place to study :-) I even had one professor with double copies of the text he was using – he loaned me one for the semester with the stipulation that I wouldn’t get a grade until I returned it. Occasionally, you can find some texts in public libraries as well. Usually there is little or no different between editions- – and when there is a difference, the information is usually the same. Especially with the 27 books assigned in literature classes. Don’t do this with math books where problems are assigned out of the book for grading- – problems are usually the only things changed in math/physics type books. On the other hand, I went through one of my math courses with no book because even though he assigned problems from the book, he never picked up the papers. As long as I was on subject and could do the work demonstrated in class and using an old text on the subject I was fine.
    Also, I never purchased a textbook until the first assigned reading. I never purchase a textbook until and unless the professor says “The final will be 100% from the book”- – which is very rare. Usually the say “from class discussion”.

    Once I ‘rented’ a textbook from the student next to me who stated he was going to spend the weekend doing something besides studying. I paid a minimal fee for ‘renting’ the book for the weekend.

    These actions saved me a stack of cash during my college years. And, with judicial use of the credit card, I still ended up with a good credit history.

  3. Daryl Bernard says:

    A great source for used textbooks and other books is http://www.abebooks.com. You will generally find books here priced far below retail and a better deal than you’d generally get on eBay. The only caution regarding textbooks is to make sure you get the correct edition, or find out from your prof if it matters.

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