Student loan companies have begun to cut back on the amount of money they disperse to students, and very few of those companies offer loans to students without credit.

“A low credit score means you have far less flexibility in your financial plan. It could keep a person from starting their own business,” said Doug Borkowski, director of ISU Financial Counseling Clinic. “If you do not have credit you probably will not be getting a home loan. That is the problem now, that mortgage lenders were too free with the money and did not have high enough standards on who they lent to.”

A credit card, while having risks, can help your credit rating. But some students and parents are wary about applying for a student credit card.

“My parents were very concerned about the interest rates and hidden fees of credit cards,” said Nick Pfeiffer, junior in mechanical engineering.

But finding the right credit card and using it properly is possible. Following these seven steps will help to ensure you’re financially stable upon graduating from college.

1. Choosing the right card

Chase, Citibank and Capital One are a few companies that offer student credit cards. U.S. Bank also offers student credit cards. According to U.S. Bank’s Web site, there are no annual fees with at least one transaction per year, 100 percent fraud protection and no application fee for their student credit card.

“If a student is going to be a convenience user who pays off the balance each month, then look for a card that offers rewards such as cash back with no annual fee,” Borkowski said. “If they are going to carry a balance from month to month, then look for the lowest interest rate and try to get a fixed interest rate if possible.”

Borkowski said a low rate for a student card would be around 12 percent, which is close to the national average. High rates are those pushing close to 20 percent.

2. Read the fine print thoroughly

Students should also consider how long the grace period is and how the company calculates the interest they will charge. The most common is average daily balance.

Another aspect to research is how high the interest rate will go if you miss payments. Additionally, find out whether or not the company will allow you to miss any payments without raising the rate.

When looking at credit cards for which to apply, always watch out for hidden fees. A helpful link to look at while comparing cards to is cardratings.com. The site offers information about which cards an individual should apply for with low credit, average credit or excellent credit.

3. Obtain good credit quickly

“The two most important factors [for obtaining good credit] are making on time payments and keeping balances low,” Borkowski said. “You can have a credit limit of $1,000 and if you have a balance that revolves to the next month of $800 it will be a drag on your credit score. Thirty-five percent of a credit score comes from on time payments and 30 percent from amounts owed.”

You should use your credit card every month. Pfeiffer said he believed purchasing large amounts on your credit card was essential for building a good credit score, which is a common misconception many students have. There is no minimum amount to building good credit history. Using it for one or two small purchases and then paying off the balance in full every month can do a lot for you in just a year, Borkowski said.

“Getting any type of loan that is reported to the credit bureaus can be a way to build credit,” Borkowski said. “If the cell phone company would report your on-time payments then that can be a way, but most cell phone companies do not report unless you miss a payment.”

4. What to avoid

“When you think about putting food or clothes on a credit card, it would probably be better to use a debit card or cash so you are not borrowing for that purchase. Otherwise you can have a revolving balance that continues to charge you interest each month,” Borkowski said.

Additionally, try to avoid missing payments. Each missed payment will result in a fee and will lower your credit score. Also avoid high balances, as they are a factor when evaluating eligibility for loans.

Avoid opening multiple credit card accounts to obtain discounts, even if you plan to cancel them right after the purchase. “Each time you get new credit it reduces your average length of credit history and that lowers your score,” Borkowski said. This can also reduce your chances of receiving a loan because of having too much available credit, he said.

5. Plan ahead

Taking Personal and Family Finance, Human Development and Family Studies 283, before you graduate is a great tool to use for planning your future finances.

“There are many places to get help with financial planning after graduation, but make sure that person has your financial goals in mind and not theirs. Always watch out for the slick sales pitch,” Borkowski said. “ISU Extension has many good publications about money management.”

6. Seek guidance when needed

If you are having trouble with your finances and need assistance, ask for help. You can make appointments to speak with a financial counselor by visiting hdfs.hs.iastate.edu/financial, and clicking on the appointment tab.

“The ISU Financial Counseling Clinic is the resource for assistance with your financial concerns whether it is budgeting, credit, credit cards, buying your first home or investing for future goals,” Borkowski said.

Iowa State is one of only five colleges or universities that have this type of resource.

“We provide professional assistance that is confidential and free to students,” Borkowski said. “We are supported by the GSB and need to always say ‘thanks’ for that support.”

You can also visit the Student Counseling Services and all they have to offer along with the Marriage and Family Therapy Clinic.