How To Build Your Credit As A Student?

Image Credits: Unsplash

You should start your credit building journey as early as possible in your life.

However, when you’re a student who already has to deal with college fees, study loans, and so much more, credit building seems like additional pressure. (been there, done that!)

But, that’s the absolute reason you should focus on your Equifax credit score and credit report in Canada.

They can literally help you so much during your student life or when you become an adult while living in the country!

So, in a world full of student credit cards, how can you choose the best Visa card for you? And most importantly, how can you build and increase your credit score quickly as a student in Canada?

 Let’s find answers to these and other queries in this one guide!

What’s A Credit Card - Various Choices

Image Credits: Pexels

Choosing your first Canadian credit card can be hard when you’re a beginner in the credit world. There are so many options like:

• Unsecured Credit Card
• Secured Credit Cards
• Debit Card
• Premium Cards
• Travel Cards
• Student Cards
• Charge Cards
• Rewards Cards

And so many more. But, the question arises which credit card should you choose for your zero to limited credit history?

Or, how can you make the visa card work for you as a student? The answer lies in your current status! To understand, continue reading!

What's the difference between a secured and unsecured credit card?

As the name suggests, a secured credit card is ‘protected/secured’ by the amount you deposit in your account. In contrast, the unsecured credit card doesn’t require a deposit to work as collateral/security for your account.

Bonus: Click to see an explanatory video of the Ask Ramit credit series to understand the comparison of Secured Vs. Unsecured credit cards.

What Is A Credit Score - Introduction

Image Credits: Freepik

It is a numerical number, between 300-900, assigned to individuals based on their financial records to analyze their creditworthiness.

So, which means if you’re a student who’s in need of a credit card now to prepare for a financial future, you need to look for the best student credit cards in Canada that can help you build your credit history and score.

However, you need to know where you stand to march forward! Now the question arises:

How to check your credit score?

You can get your Equifax credit report to see a detailed review of your score and history. You can also get it from other credit bureaus like TransUnion or Experian.

Now that you’re all prepared with the basics of the credit world as a student, it’s your time to shine in it with these credit building tips:

Tips For Students To Build Credit Quickly In Canada

Image Credits: Freepik

Having a good credit history is essential for setting up a productive life, whether you are heading off to college or have recently graduated.

Whatever your current ‘student status’ is, these credit tips can help you set your foot on the right path:

1.   Choose Your Card Wisely!

Because each credit card has its own set of benefits and rewards programs, it's critical to pick a student credit card that fits your needs.

You can look for a card with the following perks:

• Reward points for movies
• Good cashback offers
• Debt-relief programs
• Student-friendly interest fees

Most importantly, the one you pick must fall in the instant approval credit cards for the bad or zero score category. You can choose:

• A no fee secured credit card (some cards allow free service for a certain time)
• An easy approval unsecured credit card (if your score is already in a good range)

The key is to really compare student credit cards for bad or poor credit, limited credit history, and low minimum deposit to choose the best one.

Note: Getting a secured credit card won’t hurt your credit score. In fact, it can help you build and rebuild it without financial stress.

2.   Budget Your Living Cost!

Kimberly Palmer, a finance expert, explains that using a credit card can help students track their spending and create a budget that works for them at an early age.

Of course, the goals and budgeting tips can change once you enter professional life, but the idea of adopting one remains constant.

• If you feel hard to keep your spending in check, try to set your credit limit to a lower value and test it for a few months
• Stress the responsibility of paying your student card bill in full every month to see how well you can manage it

However, you don’t need to go Godzilla on your earnings and hectic study schedule as you’re still in your early phase.

Yes, one of the perks of budgeting at a young age is that you still have time to test various spending rules and saving methods!

3.   Adopt Good Credit Habits!

Image Credits: Pexels

When it comes to talking about healthy credit habits, one may go on and on. Moreover, you can accomplish a lot on the road to your ideal credit profile without overworking yourself.

For instance, here are some things you can do:

• Keep credit utilization ratio low: High utilization ratio is a red alert for the lenders hinting at your irresponsible credit nature. So, if you want to leave a good impression on credit companies or loan providers, you must maintain a 30% credit utilization ratio. However, if you want to take things to the next level, a 10% credit ratio goal should be your financial aim.
• Balance a positive credit history: Keeping your credit bills in check is the highlight tip to building a credit score as a student. It will help you build a good credit history as a student and push you to maintain it after graduation.
• Avoid hard inquiries: One thing you must avoid as a student is doing anything that can pull a hard inquiry on your account. Why? It will stay on the record for at least 7 years!

You don’t want to keep struggling and dealing with financial debt or bad credit scores in your adult life.

Bonus: Click to read a study by Matt Carter to avoid hard inquiries so that your student loans or credit scores aren’t affected.

4.   Avoid Multiple Credit Cards!

The more, the merrier is not valid in your credit building journey as a student.

In fact, when you’re a grad or post-grad, you should aim all your energy on maintaining a single card.

• The company will pull a hard inquiry every time you apply for a new credit card
• It’s hard to maintain good credit history on multiple cards as a student unless your background is extraordinary

It’s better to use one card for grocery, library, meals, etc., than use different ones just for the sake of rewards and bonuses.

Because with a limited income stream in your college life, your multiple cards will surely mess up your credit.

5.   Pay Down Your Student Loan!

According to Reviewlution, a student in Canada owes a debt of an average of $26k. The research further revealed that almost 1.7 million students in Canada are under study debt.

So, if you’re a student included in the statistics mentioned above, handling a credit card can be hard for you.

However, it can work in your favor if you pay down the debt using your credit card, as the positive payments will help you build your score as well as good credit history.

But, be sure to make the payments on time every time to keep your credit balance $0.

FAQ’s

1.   How old do you have to be to get a credit card in Canada?

The legal age to get your personal credit card in Canada is 18. However, if you’re a teen of age 15, 16, or 17, you might want to consider getting a secured credit card with an adult cosigner.

2.   How can a college student build credit quickly?

Be slow yet consistent if you want to build credit as a student. Here are some helpful tips:

• Get a credit card with student-friendly terms
• Register as an authorized user of a good credit account
• Use your card to make your student loan payments
• Review, monitor, and analyze your credit report
• Practice good spending and saving habits

Bottom Line

Starting to build your good credit history as a student can pay off in the long run. You can get good mortgage rates, study loans, automobile insurance, and several other offers.

Do you want to build your credit card fast in Canada while studying? Give this guide a read and start doing it now!

Also, if you want to read more about such credit improvement and finance tips, check Plastk Blog and embrace your perfect credit journey!