What to know about credit after graduating college
Quick insights
- It’s never too early to start thinking about responsible credit management and setting financial goals for the future.
- With some education, planning and proactive steps, you can use credit wisely after college.
- Credit utilization, credit mix and payment history are some of the factors used to calculate credit scores, so it can be helpful to understand them.
The financial transition from college to post-college life can be big. For some, a focus on finances happens before college, with many students having to pay their own way, such as by juggling jobs, financial aid and student loans. Others might not have to worry as much about their financial situation until after graduation, but then the post-graduation wake-up call might be even harder.
If you’re getting ready to graduate and want to better prepare yourself financially for the future, this article might offer some help. Let’s dive in.
Is credit important for recent college graduates?
One aspect of finances that college students or recent grads might not have thought about is credit scoring and creditworthiness.
According to the Consumer Financial Protection Bureau (CFPB), credit scores are three-digit numbers that are used to predict your credit behavior—such as how likely you are to repay a debt on time—based on information from your credit report.
Credit scoring companies use mathematical formulas called scoring models to come up with a score based on the information in your credit report. This number signifies a consumer’s overall creditworthiness and gives lenders an idea of how you might manage credit.
Having a good credit score can be important because it can impact your ability to get approved for loans, credit cards and more. It also plays a role in helping decide the terms and conditions—like interest rates—when you are approved for credit. So it can be helpful to build credit.
How to build a positive credit history as a recent graduate
When it comes to building credit, you want to make sure the credit you’re building is positive. Here are some ways to get started:
1. Start building credit where you can
As you might know, it can be hard to get credit without first having established credit history. That’s why it can be important to build credit history. You can do this by applying for credit products tailored to starters and paying your balance on time. Try to find a credit card that is designed either for students or people new to credit. These kinds of cards are designed for people that are trying to build their credit for the first time, so they might be more understanding during the approval process if card applicants don’t have any established credit yet.
Keep in mind that if you have student loans, they’ll likely show up on your credit report as installment loans. If you have student loans, you might already have a credit history.
2. Establish healthy credit habits
Once you’re approved and start using credit, it’s essential to remember the importance of making regular, on-time payments and handling credit responsibly. Consider the following tips;
- Set up a budget and set aside enough money for all your expenses and bills. This can also help you not overspend on credit cards.
- Avoid only making the minimum payments on your credit balances. It’s better to pay as much as you’re able to—not just the minimums.
- Keep your credit balances low. The CFPB says a credit utilization rate below 30% is recommended, so try to keep your credit utilization as low as you can.
3. Understand the factors that make up your credit score
It’s important to understand what factors make up your credit scores, as this can help you with your financial decisions.
Here are the VantageScore 3.0 factors included in credit scoring—including the impact each has on your score as of August 2025:
- Payment history (makes up 40% of your Vantage 3.0 score)
This factor, which has the biggest impact on your credit, accounts for how consistently you make on-time payments, or if you’ve ever missed or skipped payments.
- Depth of credit history (makes up 21% of your Vantage 3.0 credit score)
This includes both the age and types of accounts you have. In general, the longer your credit history, the better it is for your credit. That’s why it’s best to get started when you can to start building your positive credit history. The different types of credit you’re using are called credit mix. It can help to have multiple types of credit because it shows lenders that you can successfully (if you make payments on time) manage different credit types.
- Credit utilization (makes up 20% of your Vantage 3.0 score)
Your credit utilization ratio is the amount of your total available credit that you’re using. The CFPB says it’s best to keep your credit utilization rate below 30%.
- Balances, or total amount owed (makes up 11% of your Vantage 3.0 score)
This refers to the total amount of money you owe.
- New credit inquiries and accounts (makes up 5% of your Vantage 3.0 credit score)
Every time you apply for credit or authorize a hard credit pull or hard credit check, this will show up on your credit report and temporarily impact your score negatively. The number of recently opened credit accounts can factor into this too.
Impact of student loans on credit scores
Student loans appear on your credit report as a type of installment loan. Making your payments on time and paying at least the minimum amount due can contribute positively to your credit score.
Understanding and managing credit reports
You can get a free copy of your credit report from each of the three major credit bureaus by visiting AnnualCreditReport.comOpens overlay. When you review your credit reports, you might notice information like the types of credit accounts you have, the amounts of money you still owe, payment history, any hard credit inquiries that have been made and more.
One of the reasons it can become a good practice to review your credit reports regularly is so that you can check for possible inaccuracies. If you find an error in your credit reports, especially one that could be negatively impacting your credit, reporting it and getting it fixed can lead to an improvement in your credit. Another reason credit monitoring can be helpful is because it can help you spot signs of possible identity theft.
To help you keep an eye on your credit, consider signing up for a credit monitoring tool, like Chase Credit Journey®. Credit Journey® is a free online tool where you can review your credit report and VantageScore® 3.0 provided by Experian.
Establishing financial independence after graduation
It can be a good practice to set some financial goals for the future and create a realistic budget to achieve them. Whether it’s to pay off your student loans within a certain amount of time, budget for a fun trip with friends or save money for rent or a down payment, planning ahead may put you in a better position to achieve those goals.
Where possible, save up for an emergency fund so that if you’re hit with an unexpected expense, it won't derail your financial plans.
Increasing your income might also be a goal of yours. You can do this by finding a side gig or engaging in some professional development that might help you land a job. Cutting out unnecessary expenses and reducing spending is another helpful way to increase the amount of money you have left over after bills and discretionary spending.
In conclusion
If financial stability and independence are goals of yours, then you may want to focus on building credit and responsible credit management.
Being proactive about your credit can help you pave the way toward a stronger financial future.
