You just clicked on this article, which for sure will affect your future: starting from the car you want to own, the house you will buy, the business you own, and the traveling comfort you will reach.

Credit is the foundation of what we have and how the United States was built. It is how Twitter X was purchased, and how some of your classmates are studying at UC Berkeley. One of the most essential things is a credit score; the rules of the credit card game have already been set.

So, to build decent credit, you need to comply with the following:

• On-time payments on any credit card you have. I am not talking about applying for new credit cards which will help you build a more solid score. The first rule, which cannot be forgotten, is your closing date.

Fun fact about paying on time: Goldman Sachs does not like to deal with Apple for the Apple Card because Apple’s UX department made it “too” simple to see your payment dates and accrued interest. It does not align with the business model of credit card providers since they need customers who will pay crazy interest.

• Credit utilization ratio: Make sure that you keep your credit card balances low compared to your credit limit. As the statistics and personal experience show, keeping your balances less than 30% of your limit is the key. If you have a low credit limit, which is an extremely common thing, you can contact your credit card bank and request an increase in the credit line limit.
• Length of credit history: The longer the credit history, the better the contribution towards your credit history. This indicates the importance of starting early; while you are at UC Berkeley, you have a great opportunity to build a strong foundation for your after-college life. The term “length of credit” includes the age of your oldest account, the age of your newest account, and the average age of all your accounts.

Tip: If your parents are into credit cards as well, talk to your parents or even your older siblings, get to know what cards they use, and ask them to add you as an ‘Authorized User’. Thus, you will not impact others’ credit scores, but will contribute towards your own, by having a more diverse and longer credit history.

• New credit inquiries: Do not be shocked when you apply for a new credit card and your credit score might drop by 10-15 points the next month. Applying for several new credit lines in a short time can negatively impact your score. Each application typically involves a hard inquiry, which can lower your score. It is important to take every action responsibly and not try to get every credit card on the market. For example, Chase has a 5/24 rule, so you can apply for only 5 cards within 2 years.
• Derogatory marks: Please avoid actions that can lead to negative marks which are hard to remove from your credit history. These types of marks usually come from defaults in paying your credit card balance (within 90 days over the payment deadline) or defaults in paying your bills. These can severely damage your credit score and will be stuck on your credit report for 7-10 years. Do not think that because you are young things will just simply get away from you.

So, those are non-negotiable rules, if you are trying to build credit score. Now, let’s talk about the benefits of using credit cards (except the credit score reasons):

• Rewards and Cash Back: Using a debit card in Berkeley as a student is just not smart, as it means missing out on free travel points, cash backs, and other benefits. The business surrounding travel points is complex; airline companies are no longer just airlines, but have evolved to become more like credit card companies. Travel-oriented credit cards might offer perks like free checked bags, priority boarding, airport lounge access, travel insurance, and no foreign transaction fees. As a credit card user, we need to know what benefits we are getting and how to maximize their value.

If during the semester, you are buying boba and eating out with a credit card such as Chase Sapphire Preferred, you are most likely going to end up with a free ticket for spring break. In fact, most travel cards have unique formulas for points accumulation like 2X on dining, 3x on shopping.

• Fraud protection: Credit cards often provide better fraud protection compared to debit cards. You’re typically not held liable for fraudulent charges if your card is stolen and you report it in a timely manner. So, keep in mind that if your debit card is stolen, your money will most likely be stolen too. The great aspect of credit card fraud prevention is that it is a secure way of transacting.
• Interest-Free Periods: Credit cards often have a grace period where you can pay off your balance without incurring interest, effectively giving you a short-term interest-free loan. Usually it is a promotional thing, but works great if you are taking it responsibly and keeping track of your bank account.

While being a student at Haas, I would say that you don’t need 15 different cards. What works personally for me:

1. Every day spending card, which in my case is Chase Sapphire Preferred for maximizing travel rewards and points.
2. Card for a maximized cash back on a category of your choice from Bank of America –”Customized Cash Rewards”.
3. Apple card for Apple purchases, since it offers 0% APR on Apple products. Also, has an incredible disputes resolution team.
4. BILT Mastercard credit card for paying rent and getting travel points for it.

These are my principles, rules, and concepts about credit cards. Please make sure that you are taking it all seriously and with a long-term perspective. I hope for the best financial decisions and actions you make!

Thank you,
Leanid

View posts by Leanid Palkhouski