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I'm a first year graduate student in the US, and I'm considering several options to start building credit history.

1) Apply for a local credit union secured credit card (without annual fee)

2) Apply for a Discover secured credit card

3) Apply for (non-secured) Discover it Student Card

4) Any combination of the above

I'm hesitant about the third option since I have no credit history. On the other hand, a fellow graduate student of mine applied for one and got one (but he had a promo code from someone who has a good credit history). If that matters, I work as a TA and get about $17,000 per year, $700 of which (per month) are spent for rent.

What is the best way to start credit history in your opinion? Which of the ways above seem the most reasonable? Is it a bad idea to use e.g. 1) followed by 3) or 2)? If it is not, after what period of time should I do that?

  • "Student card" seems to make sense for a student… – Kevin Nov 10 '17 at 18:41
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Like @Kevin said, Option 3.

I (really, "we") can't emphasize enough, though: for God's sake PAY IT OFF EVERY MONTH!!!

If "spend, spend, spend" is too tempting, because "you deserve a break today" since you've been working really hard, and your friends are all having fun so dammit I should too... put it in the back of the sock drawer and go back to living off your debit card. (There's no shame in that. My son doesn't trust himself, so hasn't gotten a CC.)

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reflect on the question - how to build credit history. Said another way, one might say "how can I demonstrate that I need to borrow money on an on-going basis". If you're a graduate student, you are well educated. Please consider the actual need to borrow money on an on-going basis.

Consider an alternative - save money for needs and use that money when the need arises. While tempting to use other people's money for instant gratification, using one's own money is far less riskier. The one time you miss a monthly payment (check lost in the mail, "automatic" balance payment that doesn't get posted), or bank error costs hundreds of dollars in fees and a lot of time to correct.

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I have no knowledge of how Discover is as a card vendor. So for my purposes, #1 and #2 are the same: get a secured card.

I would try #3, the unsecured student card. If that fails, you can go back to the secured options, #1 or #2. They expect people to sign up with them because credit isn't available. They won't be bothered by one or two credit inquiries on your account.

I had credit cards with less income when I was a student. So don't be surprised if they give you the student card. Student cards don't expect much income. They are more likely to look at payment history. The idea is that if they give you a low limit card now, when you need one, it will be easier to bump your limit up than it would be to find you as a customer later. And if you are going to have trouble, you are most likely to have trouble in college when your income is limited. It's cheaper to find out that someone is bad customer with a low limit card. Or if you're a good customer, they can always raise your limit.

The optimal ways to build credit are to rent from someone who reports to the credit agencies and pay your own utility bills. The most important part is to pay your bills on time. Don't miss payments.

You don't need to carry a balance to build credit. Just put stuff on your card and pay the entire balance each month. Groceries are great for this. Grocery stores almost always take credit, you'd buy it anyway, so it doesn't increase your expenses. It just saves carrying cash.

It would also help if you made more money, but that's likely not possible until you graduate. Don't expect much credit until you have more income.

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