School is back in full swing. So, we reached out to Sydney Mance (she/her), head of account management at Esusu, to curate the ultimate guide on credit building for our college girlies. Without further ado…

1. Credit Scores 101: Your credit score has a big role in determining how much you might pay to access loans for things like grad school, a car, or a home. Banks and lenders use credit score tiers to determine their fees, interest rates, and repayment terms for loans and credit cards. Basically, the lower your credit score, the more you’ll pay to access these loans. The higher your score, the less you’ll be charged for the same loan product. Understanding how the credit system works is essential to building wealth—you can get started by checking out Esusu’s Renter’s Marketplace for an intro to credit education.

2. Learn the lingo: Talking about money can feel like speaking an entirely different language, but there are a few terms you’ll definitely need to know. Ex: What’s the difference between credit and debt? Debt is the money you owe—the loan or borrowed money you haven’t repaid—while credit shows your ability to pay back that loan. Then there’s interest, APR, principal, and the list goes on! Luckily, you can find credit glossaries like this one.

3. Get a credit card—and pay it off: Credit cards are a common way to build credit. You can start by becoming an authorized user on another person’s account—like a parent or family member—and eventually get a card of your own. But make sure you’re paying it off every month, even if it’s not in full. If you have a missed payment and are more than 30 days late on a payment, it will show up on your credit report and lower your score.

4. Make your rent payments count: If you’re paying rent for an off-campus apartment, you have an opportunity to build your credit score at the same time. Rent reporting platforms take on-time payments and report them to the three major credit bureaus that determine your score. On average, renters using Esusu’s on-time rent reporting service have witnessed a 45-point increase in their credit scores. Many student housing complexes work with rent reporting platforms at universities across the Northeast and the South.

5. Understand your score: Because your credit score determines so much of your financial life, it’s important to understand the logic behind it. A credit score seems complex because there are many factors and models that go into formulating the number. The four main factors you should know are: 1) on-time payments, 2) credit utilization, 3) negative marks, and 4) open lines of credit. You can find out what each of those factors means here.

P.S. Building credit goes beyond just establishing a score—it’s also about how you use your credit. The amount you spend each month relative to how much you have available is your credit utilization rate and it’s one of the most important factors determining your score. Say you have a $100 line of credit and currently have a $10 balance, then your credit utilization percentage is 10%. You want to be tracking towards a healthy credit utilization rate each month, which is usually around 25%. If you let your credit utilization percentage get too high, it indicates to lenders that you can’t handle debt properly and it will lower your score.

Is there anything else you’d like to share when it comes to personal finances?
The most common advice we hear about personal finance is to save as much as possible. Of course, saving is important and necessary. But it’s becoming harder as we continue to struggle with inflation. So when you spend, spend strategically. Make your paychecks go farther by getting credit for the bills you’re already paying. If you can build your credit now, you’ll be in a much better financial position when you graduate.