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College Students and Recent Grads

Student Loans by the Numbers: Average Student Loan Debt Statistics

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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The numbers don’t lie: As college costs have risen in recent decades, many students and their families have been forced to take out more student loans to keep up. Seeing the statistics behind college debt can help shine a light on how big the student loan crisis has become and whom it’s affecting most.

Average Student Loan Debt: In a Nutshell

  • The total amount of student debt in the U.S. has reached $1.53 trillion, making student loans the nation’s second-largest source of consumer debt, below only mortgages (and well above credit cards), according to the Federal Reserve.
  • The average student loan debt for each borrower at $36,314 owed across 3.3 student loans, according to a MagnifyMoney analysis of anonymized My LendingTree users’ September 2018 credit reports. (Note: LendingTree is MagnifyMoney’s parent company)
  • Nearly one in five adults (18.2%) in the U.S. has student debt, which is around 44 million Americans.
  • Outstanding student debt more than doubled (a 167% increase) over the past 10 years alone to its current peak. The number of Americans with student loan debt also rose 51% in the same period.
  • Across all types of institutions, the average annual cost of college was $23,091 in 2016-17. Students who borrow for college take out $6,988 in federal student loans per year, on average.

To get a complete picture of the situation, we’ve collected recent data on student loans, college costs and other student aid.

How Much Does College Cost?

In recent decades, college costs have shot up, often forcing today’s students and their families to pay more out of pocket and borrow more in student loans to cover educational expenses.

Here’s a look at the average college costs that today’s students face, by different types of institutions.

Average College Costs All Institutions

Tuition and
Fees

Dormitory
Rooms

Board

Total

All Institutions

$12,219

$6,106

$4,765

$23,091

Public Institutions

$6,817

$5,859

$4,561

$17,237

Nonprofit Institutions

$32,556

$6,704

$5,291

$44,551

For-Profit Institutions

$14,419

$6,889

$4,123

$25,431

Source: The National Center for Education Statistics

Average College Costs 4-Year Institutions

Tuition and
Fees

Dormitory
Rooms

Board

Total

All Institutions

$15,512

$6,231

$4,850

$26,593

Public Institutions

$8,804

$6,017

$4,666

$19,488

Nonprofit Institutions

$32,720

$6,709

$5,273

$44,702

For-Profit Institutions

$14,423

$6,996

$4,113

$25,532

Source: The National Center for Education Statistics

Average College Costs 2-Year Institutions

Tuition and
Fees

Dormitory
Rooms

Board

Total

All Institutions

$3,518

$3,931

$3,149

$10,598

Public Institutions

$3,156

$3,822

$3,113

$10,091

Nonprofit Institutions

$15,293

$5,609

$4,350

$25,252

For-Profit Institutions

$14,397

$6,290

$4,340

$25,027

Source: The National Center for Education Statistics

How Much Have College Costs Risen?

The cost of a college degree has risen much more steeply over the past five decades than overall inflation and wage growth.

Here’s a look at how college prices have changed over the past 50 years. Costs are adjusted for inflation and include room and board, tuition and other related fees.

How Are Students Using Financial Aid?

Student loans are just one form of financial aid that can help pay for a college degree. Gift aid — such as grants from the federal government, state or local organizations or from colleges themselves — can lower a student’s net college price and the need for student loan debt.

But as college costs have increased, student aid awards have not kept up. While most college students receive some form of student aid, just under half (45.7%) of students rely on student loans, borrowing nearly $7,000 a year.

Percentage of Students Who Receive Student Aid. 2015 - 2016 Academic Year

Institution Type

All Aid

Federal Grants

State/Local Grants

InstitutionaI Grants

Student Loans

All Institutions

82.7%

42.7%

32.3%

44.40%

45.7%

Public

80.2%

42.3%

37.3%

35.6%

38.2%

Nonprofit

89.6%

35.2%

23.8%

78.7%

60.9%

For-Profit

86.5%

69.8%

8.6%

25.3%

74.4%

Source: The National Center for Education Statistics

How Much Has Federal Student Loan Debt Risen?

The federal government remains the top source of student loan debt, lending far more than states, banks and other institutions. Of the $1.53 trillion in outstanding student debt, $1.38 trillion takes the form of federal student loans.

This college debt has increased by $860 billion since 2007, a sharp difference of 167% in just over 10 years. Meanwhile, the number of people who hold federal student loans has also risen from 28.3 million in 2007 to 42.8 million, a 51% increase.

How Much Do People Owe the Government in Student Debt?

Next, take a look at how much borrowers owe in federal student debt. The average student loan debt is $32,150 across all types of federal student loans.

But most borrowers owe far less than this, with a majority (57.3%) carrying $20,000 or less in federal student loan debt.

Six-figure student debt is, fortunately, still fairly rare, with just 5.5% of borrowers owing $100,000 or more in federal loans.

Student loan balances also vary by age, with borrowers ages 35 to 49 having the highest average student loan debt, at $37,051. That average then eases for those above 50, but not by that much. And, of course, borrowers who are college-aged (24 or younger) have the smallest balances, since this group includes those still taking out loans for their education.

Overall, borrowers between the ages of 25 to 49 account for the bulk of college debt, with just under a trillion, or $995.1 billion, of outstanding federal student loans.

Who Is Defaulting?

With balances this high, not all borrowers can keep up with student loan payment. If nine months of nonpayment pass, a federal student loan defaults.

Options such as taking student loan deferment and forbearance or enrolling in income-driven repayment plans can often be effective ways to avoid defaulting. But the data suggest that some borrowers still aren’t taking advantage of these federal student loan benefits.

In 2017, more than 1 in 10 borrowers who had left college in 2014 had since defaulted. Default rates are higher among students leaving two-year colleges and schools with programs shorter than two years.

For-profit colleges also tended to have higher rates of default, compared to public colleges and private nonprofit schools.

Percentage of people who defaulted since they entered their repayment phases three years ago (2014)

All Institutions

11.5%

Public

11.3%

Nonprofit

7.4%

For-profit

15.5%

Less-than-2-year institutions

17.0%

Public

13.80%

Nonprofit

19.80%

For-profit

17.0%

2-year institutions

18.2%

Public

18.3%

Nonprofit

17.6%

For-profit

17.5%

4-year institutions

9.0%

Public

7.5%

Nonprofit

7.0%

For-profit

14.6%

Source: The National Center for Education Statistics

What About Graduate Student Loan Debt?

Completing an advanced degree can also mean taking on a significant amount of debt, though here, not all graduate student debt is created equal. For example, 48.2% of research doctorate degree holders have student loan debt, but that proportion is significantly higher — 74.5% — for those with professional doctorate degrees.

Among those with graduate student loan debt, balances range from $50,300 among master’s degree holders up to $171,700 for those with professional doctorates.

Digging a little deeper, the data show that earning an advanced medical degree (such as an MD) comes with the highest levels of debt. Eight in 10 graduates with these degrees have student debt, with average student loan debt balances at $223,100.

What Do We Know About Private Student Loan Debt?

Besides federal student loan debt, private student loans from banks and other lenders are also an important piece of the puzzle. The amount of outstanding private student loan debt is $67.1 billion, most of which (88.3%) was borrowed for undergraduate studies.

Private Loans Outstanding

Q1 2018

Current Balance

$67.12 billion

% of Loans for Undergraduate School

88.3%

% of Loans for Graduate School Source: MeasureOne

11.7%

Source: MeasureOne

Repayment Status of Private Loans

Q1 2018

Grace

2.3%

Deferment

21.1%

Forbearance

2.5%

Repayment

74.1%

Source: MeasureOne

Percentage of Payable Private Loans Currently Delinquent

Q1 2018

30-89 days delinquent

2.8%

90+ days delinquent

1.50%

Charge-offs

1.80%

Source: MeasureOne

How Much Can That Expensive Degree Earn Me?

With college costs and average student loan debt levels on the rise, some borrowers might wonder whether their education is worth the price.

Overall, earning one or more degrees does substantially increase income. Someone with a bachelor’s degree earns 57.1% more on average than a worker with only a high school diploma. Those who hold a master’s degree or higher tend to earn twice as much as those with high school diplomas, and 28.2% more than graduates who hold a bachelor’s degree.

Of course, a college graduate’s course of study has a huge impact on their career opportunities and earning potential. Engineering fields offer the highest pay, with median salaries of $69,650 among college graduates. Studying theology and religious studies, on the other hand, resulted in the lowest pay at just $34,420 per year.

 Median Salary of Bachelor's Holders by Field of Study

Field of Study

2016

Agriculture

$44,590

Architecture

$50,000

% of Loans for Graduate School Source: MeasureOne

2016

Area, ethnic,and civilization studies

$44,260

Arts, fine and commercial

$39,830

Fine arts

$36,270

Commercial art and graphic desisn

$40,300

Business

$50,360

Business, general

$50,290

Accounting

$55,400

Business management and administration

$48,280

Marketing and marketing research

$50,200

Finance

$60,070

Management information systems and statistics

$59,950

Business, other and medical administration

$49,600

Communications and communications technologies

$45,260

Computer and information systems

$65,440

Construction/electrical/transportation technologies

$55,310

Criminal justice and fire protection

$40,990

Education

$40,240

General education

$40,270

Early childhood education

$35,940

Elementary education

$39,070

Secondary teacher education

$39,070

Education,other

$40,050

Engineering and eneineering-related fields

$69,650

General engineering

$63,770

Chemical engneering

$74,880

Civil engineering

$63,110

Computer engineering

$78,080

Electrical engineering

$74,790

Mechanical engineering

$71,860

Engineering, other

$65,480

Engineering technologies

$59,630

English language and literature

$40,280

Family and consumer sciences

$37,680

Health professions

$51,830

General medical and health services

$50,060

Nursing

56,350

History

$43,430

Liberal arts and humanities

$40,020

Linguistics and comparative language and literature

$42,040

Mathematics

$50,340

Multi/ interdisciplinary studies

$43,170

Natural sciences

$45,340

Biology

$45,330

Environmental science

$41,000

Physical sciences

$49,110

Physical fitness,parks,recreation and leisure

$40,080

Philosophy and religious studies

$39,810

Psychology

$40,100

Publicadm inistration and public policy

$56,460

Social sciences

$50,310

Anthropology and archeology

$39,800

Economics

$60,350

Geography

$45,210

lnternational relations

$52,290

Political science and government

$50,330

Sociology

$40,030

Miscellaneous social sciences

$42,190

Social work and human services

$36,200

Theology and religious vocations

$34,420

Other fields

$40,380

Source: The National Center for Education Statistics

How Many Students Are Leaving School Without Getting a Degree?

For students who have already taken out student debt, completing their degree could make the difference between easily repaying their loans or ending up in default.

Part-time students are much likelier to drop out of college overall, while for-profit college have the worst attrition rates in terms of types of institutions.

As student loan balances have grown, so has the impact of this debt has on borrowers’ lives. By understanding the numbers underlying the student debt crisis, we can better gauge its effects. Overall, though, a degree is still worth getting despite rising college costs and the amount of debt needed to pay them.

But today’s students and borrowers need to be wiser with their educational and financial choices to avoid the worst outcomes. As the data suggest, the type of school and the field of study can play a big role here.

Statistics can’t always capture individual cases, as one student’s situation won’t necessarily match the averages. But one thing that might hold true for most if not all borrowers is the importance of knowing your options to manage this debt. If you owe student loans, check out our top picks for refinancing student loans to help you get out of being another statistic in the ongoing student debt crisis.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
Elyssa Kirkham |

Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

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College Students and Recent Grads

College Ave Private Student Loans Review: Accessible Eligibility Criteria, Flexible Repayment

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If you’re concerned about eligibility for a private student loan, consider that College Ave Student Loans stands out for its accessibility.

You could be an international student without a GED seeking an associate degree on a part-time basis, for example, and still qualify for College Ave private student loans.

Founded by former Sallie Mae executives in 2014, the online-only company offers competitive interest rates to students in college as well as career or graduate schools, as well as their creditworthy parents.

To ensure it’s the right lender for you, consider our review.

College Ave Student Loans review: The basics

While you could qualify for College Ave private student loans with several different educational backgrounds and ambitions, you still need to be creditworthy. Having a credit score of at least 660 is a good start.

The lender doesn’t disclose its specific credit criteria, but you could gauge your (or your cosigner’s) eligibility using the lender’s pre-qualification tool. Passing that test would unlock these loan features:

  • Loans for part- or full-time undergraduates, graduate students, career school students and parents
  • Prequalify with a three-minute application (and without affecting your credit)
  • No fees to apply
  • Fixed and variable interest rates

  • Borrow between $1,000 and your school’s full cost of attendance
  • Choose from four in-school repayment options, including full deferment
  • Select one of four repayment term options: five, eight, 10 or 15 years
  • Receive your loan in as little as 10 days after applying
  • Cosigners are accepted — and encouraged (note that they are required for international students who have a Social Security number)
  • Release your cosigner after more than half your repayment term has elapsed
  • Enjoy a federal loan-like six-month grace period after leaving school
  • Net a 0.25% interest rate reduction for enrolling in autopay
  • No penalty for paying off your loan early
  • Forbearance — the ability to temporarily suspend payments — is awarded on a case-by-case basis
  • Student loan forgiveness in the case of the borrower’s permanent disability or death

While the majority of the loan characteristics above are true no matter your status in school, there are some notable differences for graduate students, career school students and parents.

Graduate students

Whether you’re seeking a postgraduate, master’s, doctoral or professional degree, you can count College Ave private student loans as an option. Note that the ceiling on College Ave’s interest rate ranges as of early June 2019 was significantly lower for graduate students compared to undergrads.

In summer 2019, College Ave also added unique perks for postgraduate students seeking an MBA or other professional degree. The loans include longer grace periods, for example, with 12 months for dental students and 36 months for medical students.

There are also deferments available for students who enter a residency program — or, in the case of law school students, a clerkship — after receiving their degree. Additionally, students seeking these advanced credentials might be able to select a longer loan term (20 years) than their peers.

Career school students

If you’re pursuing an associate, bachelor’s or graduate degree in a career-focused program, including at some community colleges, keep this bonus in mind: College Ave offers borrowers of this loan type a $150 statement credit for completing their program.

Parents

College Ave gives parents even more repayment term flexibility. The lender said on its website that it would assist creditworthy parents in choosing one of 11 possible repayment terms, spanning between five and 15 years.

Another plus of borrowing from College Ave: The lender allows Mom or Dad to directly receive up to $2,500 of the loan funds to cover smaller, secondary expenses including books and supplies. (The balance would be sent directly to the student’s school.)

On the downside, however, the floor on College Ave’s interest rate ranges as of early June 2019 was noticeably higher for parents than for undergraduate students. Plus, parent borrowers only have three in-school repayment choices, not including full deferment. Making interest-only payments is the cheapest option available.

What we like about College Ave Student Loans

It’s rare to find a lender that’s so accessible. In College Ave’s eyes, you don’t need a high school diploma or GED, don’t need to be pursuing a four-year degree, don’t need to be enrolled full time — you don’t even need to be an American student (as long as you have a Social Security number).

Aside from flexibility on qualifying, below are a few more features of College Ave private student loans that benefit from additional context.

A bevy of in-school repayment options

Many private lenders offer fewer repayment options than College Ave. But College Ave provides four payment methods, including:

  • Deferred: Postpone payments until six months after leaving school, allowing interest to pile up on your balance.
  • Flat: Submit monthly dues of $25 to eat into the accruing interest on your loan.
  • Interest-only: Pay only enough each month to cover accruing interest to ensure you face the same balance you borrowed upon leaving school.
  • Full: Enter repayment immediately by making interest-and-principal payments, so you’ll owe less than what you borrowed once you step off campus.

For cash-strapped students, making (significant) in-school payments isn’t always possible. For other students with income or parental support, entering repayment sooner could pave the way for a faster route out of debt. That’s why it’s so nice to have options.

According to the lender, about 6 in 10 College Ave borrowers elect to submit in-school payments to whittle down interest before the reality of repayment hits upon graduation.

Pick your repayment term

Some lenders, including Sallie Mae, assign you a loan repayment term based on your creditworthiness.

One benefit of borrowing College Ave private student loans, however, is that you (and your cosigner) could independently choose your term. You might select five, eight, 10 or 15 years, depending on your budget and future income. (Unlike with federal loans, however, private lenders like College Ave don’t allow you to change terms later, extending or shortening your repayment term as you wish.)
College Ave said on its website that 84% of borrowers choose a term of 10 years or less.

Receive strong customer service

Nearly 400 College Ave borrowers had awarded a 4.8-out-of-5 rating of their lender — at least according to the lender website.

For a more objective accounting, Trustpilot lists a four-star rating for College Ave, and the Better Business Bureau gives the lender an “A+” grade.

What to keep in mind about College Ave Student Loans

If you like what you’ve learned about College Ave private student loans, keep in mind that no lender is perfect for every borrower.

Decide for yourself whether the following facts should point you in the direction of a competitor.

A long trek to cosigner release

By College Ave’s math, 96% of undergraduates have a cosigner on their loan. After all, teens and 20-somethings can make up for their thin credit files by piggybacking on a creditworthy cosigner, usually Mom or Dad.

The majority of top-rated lenders allow you to release that cosigner (from their legal obligation to repay your debt, if you can’t) after 12 to 48 months of successful payment history.

With College Ave private student loans, however, it’s a long haul. To remove your cosigner from your loan agreement, you must:

  • Reach the halfway mark of your loan term
  • Make 24 consecutive on-time payments
  • Show twice as much income as your loan balance
  • Pass a credit check

If you want to reward your cosigner by sending them on their way, you might avoid a 15-year loan term. Under that scenario, you wouldn’t be able to release them until you’ve been in repayment for seven-and-a-half years.

To make matters worse for some borrowers, international students can’t achieve cosigner release at all.

If cosigner release essential to you and your guarantor, you might consider borrowing from Sallie Mae, which offers a 12-month route to release.

A limited form of forbearance

Forbearance is a vital component of any student loan, as it allows you to press pause on your repayment in the face of hardships such as unemployment.

Unfortunately, College Ave is cagey about its forbearance policy, leaving details off its otherwise resource-heavy website.

It turns out, the lender evaluates forbearance applications on a case-by-case basis. In other words, if you find yourself out of work or under another sort of financial duress during repayment, there’s no guarantee College Ave will grant you a reprieve.

If you think you might need a more clear-cut safeguard built into your loan, you might opt to borrow from Discover, as the bank offers a variety of protections, from payment extensions to as many as 12 months of forbearance.

Third-party loan servicing

If you’re attracted to College Ave, in part, because of its modern, easy-to-use platform and strong customer service record, you might be disappointed to learn that the company outsources the servicing of its loans.

Repayment of College Ave private student loans even takes place on a different website. University Accounting Service (UAS) handles statements and payments and fields customer concerns.

When deciding whether College Ave is right for you, factor UAS into the equation, too. You might be wise to contact the latter company to get a sneak peek of its effectiveness in answering your loan management questions.

If you’re left wanting more, you might be better off walking into your local bank or credit union, where your loan will be funded and managed under the same roof.

Are College Ave Student Loans right for you?

If you’re an atypical college student — maybe you’re attending part time or seeking an associate degree — College Ave private student loans are more accessible than education financing found elsewhere.

Even if you’re attending a traditional four-year school, you could be drawn to the online lender’s assortment of in-school and postgraduate repayment options. They give you the power to customize a loan that works best for your borrowing situation. Plus, if you (or your cosigner) are especially creditworthy, you could unlock some of the lowest interest rates offered by banks, credit unions and online competitors.

College Ave won’t be as appealing, however, if you’re counting on a fast pathway to cosigner release or federal loan-like safeguards such as mandatory forbearance. To pit College Ave against the competition, find out where the lender ranked among our top-rated student loan companies.

MagnifyMoney has independently collected the above information related to this review, which is current as of June 3, 2019, unless otherwise noted. College Ave. neither provided or reviewed the information shared in this article.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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Building Credit, College Students and Recent Grads, Credit Cards, Earning Cashback

How You Can Have a Good FICO Score Just One Year After Opening a Credit Card

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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When I moved to the U.S. from my hometown of Hangzhou, in China, to pursue my undergraduate degree, the thought of establishing a credit history wasn’t even on my radar. I was, after all, an international student from China, where day-to-day credit card use had only recently caught on.

It wasn’t until I returned to the U.S. a few years later to pursue my master’s degree in Chicago that I realized I’d need to establish credit if I planned to launch my career in the States.

Just one year after I opened the card, I already had a solid FICO score – 720, to be exact. This score landed me safely in the “good” credit range, meaning I probably would not have trouble getting approved for new credit. I still had work to do if I wanted to get into the “very good” credit category, which starts at 740. But as a credit card newbie, I was not disappointed in my progress. 

Here’s how I did it.

I selected the right card for my needs

I wish I could say I diligently researched credit cards to choose the best offer and best terms, but honestly, I just got lucky.

Shortly before graduate school started, I visited friends in Iowa. When we were about to split the bill after dinner at a Japanese restaurant, I noticed that all my friends had a Discover card with a shimmering pink or blue cover. The Discover it® Student Cash Back was known for its high approval rate for student applicants, and had been popular among international students.

I thought, “Oh, maybe I should get this one, too.”

One of the friends sent me a referral link that very night. I applied and got approved quickly. We both received a $50 cash-back bonus after I made my first purchase — an iPhone — using the card through Discover’s special rewards program. I even received 5% cash back from the purchase.

Besides imposing no annual fee, the card had other perks, such as rewarding me with a $20 statement credit when I reported a good GPA (up to five consecutive years), letting me earn 5% cash back on purchases in rotating categories and matching the cashback bonus I earned over the first 12 months with my account. For me, it was a great starter card, but there are plenty of other options out there.

Check out our guide on the best credit cards for students.

I also could have explored other options of establishing credit, like opening a secured card, for example, which would have been a smart option if I hadn’t been able to qualify for the Discover it student card.

I never missed a payment

Despite my very limited financial literacy at the time, I attribute my strong credit score to the old, deeply ingrained Chinese mentality about saving and not owing.

I never missed payments, and I always paid off my balance in full each month, instead of just making the minimum payment. I didn’t want to pay a penny of interest.

Credit cards carry high interest rates across the board, but student credit cards generally have some of the highest APRs. This is because lenders see students like me — consumers without much credit history — to be risky borrowers, and they charge a higher interest rate to offset that risk.

Best Student Credit Cards June 2019

It wasn’t until much later that I learned payment history is critical to good credit. In fact, it is the biggest factor there is, accounting for 35% of my FICO score.

A Guide to Getting Your Free Credit Score

I was careful not to use too much of my available credit

My friends with more experience advised me to use as little of my available credit as possible. They warned me that overuse had hurt their credit scores in the past. This didn’t much sense to me, but I followed their advice, for the most part diligently.

I later learned this is almost as important as paying bills on time each month. Your utilization rate is another major factor in your FICO score. Credit experts urge cardholders to keep their credit utilization ratio below 30%. The lower, the better.

That means if you have three credit cards with a total available limit of $10,000, you should try to never carry a total balance exceeding $3,000, and you really should aim for much lower than that.

A Guide to Build and Maintain Healthy Credit

I beefed up my score with on-time rent payments

Keeping in mind the importance of not maxing out my credit card, I never considered paying my rent with the card. In fact, some landlords charge credit card fees for tenants who try to pay with plastic.

But I did find a way to establish credit by paying rent using my checking account.

I paid rent to my Chicago landlord through RentPayment, an online service. RentPayment gave me the option of having my payments reported to TransUnion, one of the three major credit-reporting agencies (the other two are Experian and Equifax). Because I knew I’d always pay bills on time, I signed up for the program.

This likely helped me improve my credit mix, another key factor influencing a credit score. The more types of accounts you show on your report, the better your score can be — if you make all your payments on time.

Yes, I made mistakes. This was my biggest one

My first foray into the world of credit wasn’t completely blip-free.

The only thing that hurt my credit, besides my short credit history, was that I had tried signing up for a Chase credit card, along with other ways to finance my iPhone, just a few days before I applied for my Discover card.

None of the other banks approved my applications, and my score went down at the very beginning, due to the number of “hard inquiries” against my credit report. Hard inquiries occur when lenders check your credit report before they make decisions regarding your application. Having too many inquiries in a short period of time can result in a ding to your credit score.

I’ve learned my lesson, though, and I’ll be cautious in the future when it comes to applying for a lot of credit in a short time period. Overall, it should be noted that you should not be afraid to apply for new credit — even when hard inquiries do hurt your score in the short term, it typically isn’t disastrous, and your score should recover fairly quickly as long as you are a responsible user of credit. Having more available credit can also help your utilization rate — as long as you don’t increase your charges, of course.

You can also check to see if you have prequalifed for any credit cards without triggering a hard inquiry.

If you’re new to the world of credit cards, consider taking the steps I outlined above, and you, too, may have a healthy credit score before you know it.

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Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at [email protected]

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