The holidays are upon us and for college students, this generally marks the end of a semester and a few weeks at home. If you or someone you know plans to graduate soon, take advantage of the holiday break to consider how to build your credit.

Entering the "Real World" with Poor Credit

You may wonder how a credit score could affect someone who isn’t looking to obtain a car loan or buy a house. Outside of these conventional reasons to build credit, a low credit score can actually have a substantial impact when you begin applying and paying for services yourself. Entities that lend money or require periodic payments will look at your credit score to determine the potential risks of giving you a loan or a lease. If you have not proven your ability to make payments on-time, it will be a warning sign to creditors.

One major obstacle that many post-grads realize soon after entering the "real world" is that renting an apartment often requires a security deposit. As a first-time renter with no credit history, this can result in some headaches. To begin, you may not get approved by a landlord or apartment rental office without a credit record. If you are able to get approval, a deposit will be required. For someone without a credit history, this deposit can result in up to a full month’s rent that will not be returned until moving out. If you are just getting started, you may not have extra cash lying around. Therefore, this obstacle can limit your options when searching for an apartment.

Also, when you call the utility company to get power into your new apartment, they too will note your non-existent credit score. In some cases, this results in a several hundred dollar down payment just to turn the lights on! And one more thing, once you’ve moved in and turned the lights on, you’ll probably want to have wi-fi, right? Cable and internet providers also look at credit scores. And yes, they will also require a healthy, potentially non-refundable deposit if your score does not reflect a good payment history.

Establishing a Credit Record

Building a credit score at a young age can be quite simple even if you do not currently pay your own bills. The first step is to determine what type of credit is suitable and then begin making monthly payments. One option is to obtain an "unsecured" credit card with a low spending limit, and pay the entire credit card balance off each month. This takes discipline and self-control, but if done correctly, it can quickly build a foundation for your credit history.

If you are not able to get approval for the traditional unsecured plastic, another consideration could be a student, or "secured," credit card. Because you are considered a credit risk, when you apply for a student card, the credit card company will require you to make a security deposit. The amount that you put down as your security deposit will also be the card’s credit limit. As you use the card and pay off the balance, you will begin to build your credit record.  If you don’t pay the balance, the credit card company will use your security deposit to pay what you owe. This is a great way to begin your credit history and helps mitigate the risk and temptation involved with an unsecured card. In addition to building your credit with reduced risk, the secured card will usually allow you to "graduate" to an unsecured card once you have proven your ability to pay your balance.


Transitioning from school to the workforce is not easy. While there are ways to work around the burdens mentioned, these are not issues you want to face as you start your post-grad journey. This holiday break, take advantage of your down time away from school to give your future self a gift: Apply for credit and build your score!

This article was contributed by Anthony Harcourt, an Investment Analyst at Bedel Financial Consulting, Inc.

Elaine E. Bedel, CFP, is CEO and president of Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. She is a featured guest each Wednesday on the WTHR (NBC, Indianapolis) Channel 13 News at Noon, “Your Money” segment. Elaine’s book, “Advice You Never Asked For… But wished you had,” is available on For more information, visit or email Elaine at

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