Why You Should Care About Building Credit Early

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Let’s discuss something crucial that often flies under the radar for college students—building credit. If you’re wondering, “What exactly does that mean?” or “Why should I care?”, get ready, because we’re about to explore the world of financial credit and why it can significantly impact your future.

What is Financial Credit and Why is it Important?

First things first, let’s break down what financial credit actually is. In simple terms, financial credit is your ability to borrow money and repay it over time. When you take out a loan, use a credit card, or even sign up for a phone plan, you’re using credit. Lenders, like banks or credit card companies, look at your credit history to decide whether they’re going to lend you money and on what terms.

Now, why should you care? Well, having good credit opens up a lot of doors. It can mean the difference between getting approved or denied for a loan, securing a lower interest rate on that student loan, or even getting a job or renting an apartment. Better credit scores often translate to better interest rates on student loans, which can significantly reduce the amount you repay¹. Good credit can save you thousands of dollars in interest over your lifetime and give you more financial freedom.

How a Better Credit Score Can Impact Your Life

What’s a credit score, and why is it so crucial? According to FICO, your credit score is a number that ranges from 300 to 850, representing your creditworthiness. The higher your score, the better. Here’s how a good credit score can positively impact your life:

Better Loan Terms: Whether you’re borrowing money for a car, a home, or education, a higher credit score can get you lower interest rates and better terms on loans.
Easier Approval for Rentals: Many landlords check credit scores before renting out properties. A higher score makes you a more attractive tenant.
Lower Insurance Premiums: Believe it or not, some insurance companies use your credit score to determine your premiums. A better score = lower premiums.
Job Opportunities: Some employers check credit scores as part of their hiring process, especially for roles that require financial responsibility.
Peace of Mind: Good credit gives you financial flexibility and peace of mind, knowing you can handle emergencies or major purchases without stress.

Factors That Impact Your Credit and How to Build It

Building credit isn’t rocket science, but it does require some savvy moves. Here are the key factors that impact your credit score and how you can build it:

Payment History: Pay your bills on time, every time. Late payments can seriously hurt your score.
Credit Utilization: This is the amount of credit you’re using compared to your credit limit. Try to keep it below 30%.
Length of Credit History: The longer your credit history, the better. This is why it’s smart to start building credit early.
Types of Credit: Having a mix of credit types (credit cards, installment loans, etc.) can positively impact your score.
New Credit Inquiries: Applying for a lot of new credit in a short time can ding your score. Be selective and strategic about new applications.

Introducing Boom: A Smart Solution to Establish Credit

Now that you know why building credit is crucial, let’s talk about a handy tool to help you get started: Boom. Boom is a service available in the Going Merry Marketplace that helps you establish and build credit by reporting your rent payments to credit bureaus. Yes, you heard that right—paying your rent on time can now help boost your credit score!

How Boom Works

Boom allows you to report your rent payments to major credit bureaus – Experian, Equifax, and TransUnion. This means your consistent, on-time rent payments can now positively impact your credit score. Imagine boosting your credit score by over 28 points in just two weeks, or even up to 105 points! This is a game-changer for students who are new to credit or for parents looking to rebuild or improve their credit profiles.

Key Features:

Affordable Pricing: Boom charges a one-time enrollment fee of $10 and a monthly fee of $3 (billed annually). For past rent reporting (up to 24 months), there’s a one-time charge of $25.
Positive Payment Reporting: Please see this webpage for specific reporting.
Quick Setup: Sign up in minutes by downloading the Boom app, verifying your identity, and linking your bank account. Boom automatically detects and reports your rent payments.
No Hard or Soft Credit Pulls: Enrolling in Boom won’t negatively impact your credit score as there are no credit checks involved.

Why Use Boom?

Build Credit Efficiently: For students and young adults, establishing a solid credit history can open doors to better financial products and lower interest rates on loans. For parents, improving your credit can mean lower security deposits and better loan terms.
Simple and Convenient: Boom works seamlessly with various payment methods like Zelle, Venmo, and ACH transfers, making it easy to use regardless of how you pay your rent.
Flexible and Secure: With Boom, you can continue building your credit even if you move, and your bank details are securely encrypted.

Building credit early can set you up for a successful financial future. With tools like Boom, you have a head start in creating a solid credit history while managing your everyday expenses. So, students and parents, make credit building a priority and watch those opportunities unfold!

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 As was announced by the U.S. Department of Education (ED), federal student loans have resumed accruing interest starting September 1, 2023, and federal student loan payments were reinstated starting in October. Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan. See https://studentaid.gov/ for more information.

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Daniel Bod

Writer at Going Merry

Daniel Bod is a seasoned higher education professional with two decades of expertise in financial aid. He began his career at Hofstra University in 2004, after completing his Bachelor's degree from Stony Brook University in 2000, where he provided comprehensive financial aid support to families from diverse backgrounds. In 2007, he transitioned to LIU Post and advanced to Senior Assistant Director of Enrollment Services, dedicating over ten years to assisting students and families in various capacities. During his tenure at LIU Post, Daniel also earned a Master's degree in Childhood Education. Transitioning to St. George's University in 2019, he spent over four years focusing on the financial needs of medical students. Daniel excels in advising on loan options and empowering students and families to make informed decisions about educational finances.