Your credit score is a single number that comes from a report that has information about accounts in your name such as credit cards, student loans, utility bills, cell phones, car loans, and so on. This score can determine whether or not you will qualify for a loan (car, home, student, etc.), what interest rates you will pay, how much your car insurance will cost, and your chances of being hired by some organizations.

While using credit cards responsibly is a good way to build credit, acquiring a credit card has become much more difficult for college students. Since May 2009, college students under the age of twenty-one cannot get a credit card unless they can prove they are able to make the payments or unless the credit card application is cosigned by a parent or guardian.

Even if you prove you can repay credit card debt, it is important for you to fully understand how credit cards work and how they can both help and hurt you. (Table 2.2 lists credit cards dos and don'ts.) A credit card allows you to buy something now and pay for it later. Each month you will receive a statement listing all purchases you made using your credit card during the previous thirty days. The statement will request a payment toward your balance and will set a payment due date. Your payment options will vary: You can pay your entire balance, pay a specified amount of the balance, or pay only a minimum payment, which may be as low as $10.

Be careful. If you make only a minimum payment, the remaining balance on your card will be charged a finance fee, or interest charge, causing your balance to increase before your next bill arrives even if you don’t make any more purchases. Paying the minimum payment is almost never a good strategy and can add years to your repayment time. In fact, if you continue to pay only $10 per month toward a $500 credit card balance, it will take you more than five years to pay it off! If you have a 13 percent interest rate, you’ll pay more than $200 in interest—increasing the amount you’ll pay for your original purchase by nearly 50 percent.

If you decide to apply for a credit card while you’re in college, remember that credit cards should be used to build credit and to handle emergencies. They should not be used to buy things that you want but do not need. However, if you use your credit card just once a month and pay the balance as soon as the bill arrives, you will be on your way to a strong credit score in just a few years.