How to Build Good Credit as a Student

If you’re a college or university student, it may feel like you’ve entered a new level of “adulting”. Part of this experience may involve taking on more financial responsibility, whether that means paying rent for the first time, covering some or all of your tuition payments or simply managing your own bills and expenses.

No matter what your situation is, being a student is a great opportunity to start building good credit. Not only will this help you now, it will help form a solid foundation for your financial future.

Here’s how to build good credit if you’re a student with a limited financial history.

How does a credit score work?

When we talk about building good credit, we’re mostly talking about your credit score. This refers to a number that represents your credit risk. The number is between 300 and 850, and the higher it is, the better (you want to aim for 600 or more, typically). The better your credit score is, the more likely you are to be given credit by a financial institution or other lender. This includes personal loans, car loans, credit cards and even mortgages.

There are financial habits that help build a solid credit score but also negative behaviours that weaken your credit rating. The longer you’ve used credit and the more credit you’ve had access to, the easier it is for lenders to assess risk.

If you’ve never used credit — for example, because you’ve never had a credit card or paid bills in your name — you essentially have no way to demonstrate how you behave with access to borrowed funds. Knowing this, it’s important to use credit and build that great rating. Trust us, future you will be glad you did!

You might also like: 

• How to Build Good Credit as a New Canadian
• Take the Quiz: All About Credit Score
• Soft Credit Check vs. Hard Credit Check: How do They Affect My Credit Score? 

Start with a low limit or student credit card

A credit card is an excellent way to start building a strong credit rating in your name. Start with a low limit or student card (many have an initial limit of around $500). If you don’t qualify for either of these options, a reloadable prepaid credit card is another good possibility (not the prepaid cards that can be purchased anywhere and mimic a gift card; we’re talking about a registered prepaid credit card in your name, from a financial institution, that can be reloaded unlimited times).

Make regular purchases on your credit card and be sure to pay the monthly balance on time. Whenever possible, pay the balance in full. If you cannot pay the balance in full every month, be sure to pay well above the minimum monthly payment. These habits will demonstrate financial responsibility and quickly strengthen your credit score.

Pay your bills on time

Whether it’s a credit card bill, a phone bill or the utility bills for your apartment, paying your bills on time is critically important. Car and insurance payments are just as important, if not more so, and in some areas such as Toronto ON, rent payments now affect your credit score. If your rent and/or bills are paid late, this may be a problem, but if you pay your bills on time, it’s great news! Keep up the great work and watch that credit rating soar.

File your taxes on time

One of the easiest ways to positively influence your credit score is to file your taxes on time and promptly pay any amount owing to the Canada Revenue Agency (CRA). Like other bills, a late CRA payment will be noted on your credit report and have a negative impact on your credit rating. File early, pay on time and reap the benefits of your good behaviour!

Manage your student loans responsibly

If you have a student loan or personal loan to help cover your post-secondary expenses, it’s important to make all principal and interest payments as agreed upon in your contract. Defaulting on a loan will have a very negative impact on your credit score, so managing your debt well is one of the most important ways you can protect your credit rating.

We are here to help

If you’re interested in a personal loan to help cover your college or university expenses, we can help with credit building loans and products. Plus, you can now get approved in minutes with low credit or no credit history! An application takes only minutes and wont affect your credit score.

We know that each of our customers’ situations is unique and are committed to working with you to help you find a solution that will best fit your needs. Contact your easyfinancial branch or easyhome store, or give us a call at 1-888-502-3279 to learn more about how we can approve you for credit building loans with low or no credit history.