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Going to college or university is a great way to invest in your future, develop a skill, or learn about something you love. But, one of the side effects of all the courses, exams, and study sessions is the lack of time to deal with other important things, such as the health of your finances and credit scores

In fact, by a certain age, it becomes quite important to start building good credit, since it’s one of the key elements that can help get you approved for a mortgage, car loan, or other helpful credit products. Keep reading to find out how to build credit as a college student.

How To Start Building Credit As A College Student

As you know, being a college student is incredibly time-consuming, so it’s often tough to find methods of building good credit. The good news is, that there are a few simple ways to get your credit history started and maintain healthy credit scores, such as:

Get A Student-Friendly Credit Card

In Canada, there are plenty of providers that offer credit cards specially meant for students or options affordable and efficient enough for any student to use. 

Some cards have no annual fees while others come with benefits like roadside assistance or travel perks. There are even credit cards that allow you to earn cashback rewards, which you can use to pay your monthly bills or acquire select discounts. Any of these credit cards could be ideal for financing your tuition, school supplies or living costs. 

How Will A Student-Friendly Credit Card Help You Build Credit? 

  • Payment History – Making on-time payments is one of the most important factors used to calculate credit scores. Using a credit card and paying it off on time every single month, will help you build a healthy payment history and credit score.
  • Debt-To-Credit Ratio – When using a credit card to health build credit, it’s important to not max our your card every month. Keep your utilization ratio at less than 30%. If you have trouble accomplishing this, pay off your balance twice a month.
  • Credit History – It’s important to start building your credit history early. This way, once you’re in the market to buy a car or house, you’ll have a long and healthy credit history for lenders to check.

Best Student-Friendly Credit Cards

Annual FeeBest For
Tangerine Money-Back Credit Card $0The independent student
Scotiabank SCENE Visa Card$0The student who loves movies
BMO CashBack Mastercard$0The student who likes extra cash
CIBC Aventura Visa for Students$0The student who loves to travel
CIBC Dividend Visa Card for Students$0The student who loves to cook
PC Financial Mastercard$0The student who loves to eat out

Use A KOHO Credit Building Program

If you’re looking for an easy way to build your credit, then you should consider one of KOHO’s Credit Building Programs.

KOHO Credit Building

This costs $5, $7, or $10 a month, depending on the KOHO account you have. To subscribe to this program, you’ll first need to open a KOHO account, which comes with a prepaid Mastercard. This is required to set up a pre-authorized payment system for your credit building program subscription fee.

When you subscribe to this credit building service, KOHO will open a line of credit for you. Your monthly subscription fees will be used as payments toward the line of credit, which KOHO will report to a major credit bureau. This will help you build a positive payment history which can positively affect your credit scores. 

KOHO Flexible Credit Building

KOHO also offers a Flexible Credit Building Program. This option is a secured line of credit. Users need to earmark $30 to $500 within their KOHO account to act as security for the line of credit. There is also a $5 monthly service all users will need to cover. Once your line of credit is set up, you can use it to make purchases. At the end of your billing cycle, you’ll repay what you used and that payment will be reported to a credit bureau. These on-time payments can help you build a healthy credit history.

Extra Perks When You Use KOHO’s Credit Building Program

To be able to subscribe to KOHO’s Credit Building Program, you need to sign up for a KOHO account, which comes with numerous benefits such as: 

  • Cash Back – Earn up to 2% cash back on groceries, transportation, food, and drink and up to 50% extra cashback when you shop with select KOHO partners.
  • Earn Savings Interest – Earn up to 5% interest on your entire KOHO account balance.

Use Landlord Credit Bureau To Have Your Rent Payments Reported

Living in your own apartment while attending college? If so, your landlord may be able to report your rent payments to one of Canada’s major rental property resources, like the Landlord Credit Bureau. The LCB was created in 2012 to increase revenue for landlords or property managers and award tenants for responsible behaviour.   

Nowadays, many Canadian landlords will join the LCB and consult its database when renters apply. If you’re already a registered tenant, they can run your credit and see any serious issues (payment or otherwise) that you’ve had during your previous tenancies. 

If your credit and tenant/rental history is clean, you should have decent chances of approval. In addition, any responsible rent payments will get reported to Canada’s credit bureaus and gradually help build good credit. 

Use A Secured Credit Card

As a young student, you may not have enough credit history to qualify for a regular credit card. Luckily, secured credit cards come with many of the same standard perks as regular cards (minimum payments, etc.), only they have easier approval standards. Actually, secured cards are often used specifically to build credit, because lenders will report payments to at least one of Canada’s credit bureaus; Equifax and TransUnion. 

How Do Secured Credit Cards Work? 

To activate your secured credit card you’ll need to pay a security deposit. The security deposit may be equal to your desired credit limit, but not always. Once you no longer need your secured credit card and you’ve paid your balance off, you’ll get your deposit back. 

However, it’s important to understand that secured credit cards carry many of the same risks as normal credit cards, like high-interest rates, and potentially unmanageable debt.

How Do Secured Credit Cards Help You Build Credit?

All the credit activity, payments, late and on time, balance, utilization amount, etc. associated with a secured credit card is reported to at least one credit bureau. This is how a secured credit card can help you build credit. 

Pay Down Your Student Debt

If you have an active student loan or student line of credit, another gradual way to improve your credit is to pay off your debts. For example:

  • Private student loans should always be paid on time as lenders will usually report late payments to the credit bureaus after 30 days. Don’t forget, timely loan payments are good for your credit. 
  • Student lines of credit allow you to make minimum or partial payments to avoid penalties. If you can’t make larger payments, at least always make the minimum payment.
  • Federal student loans have a grace period of about 90 days before a lender will report your late payments to TransUnion or Equifax. You may even be allowed to pay after college but this doesn’t mean you should willingly miss payments.

Keep Up Good Credit Habits

Bad credit is often the result of poor credit habits, like not paying debts on time or using up too much of your available credit. Then again, it may be due to a mistake on your credit report or not having enough credit history in the first place. If you’re struggling to create good credit habits, here are a few tips to get you started. 

Paying Bills Responsibly 

As mentioned, a healthy payment history is one of the most common and often significant factors that affect your credit. So keeping up with payments can help build good credit, whether you’re a student or not. 

Maintaining A Low Credit Utilization Ratio 

A credit utilization ratio of 30% or lower is often preferred by lenders. High ratios can be seen as a red flag and may negatively impact your credit. 

Avoid Applying For New Credit Too Often

When you apply for credit cards, loans and other credit products, your lender or creditor will usually pull your credit report to assess your creditworthiness. This is known as a hard inquiry. While one hard inquiry can negatively affect your credit, it’s typically small and temporary. On the other hand, multiple hard inquiries within a short time frame can have more of a negative effect on your credit scores.

Checking Your Credit Report

In Canada, consumers can check their credit reports and credit scores through numerous sources such as credit bureaus, banks, or third-party credit score providers like CompareHub. Currently, Equifax offers Canadians free access to their credit report and Equifax score online for free while Transunion offers a consumer disclosure for free. Check your report frequently for errors, signs of fraud or ways you could be fixing your credit.

What Are Credit Scores?

Credit scores are characterized by a three-digit number that’s assigned to you after you start using credit products. In Canada, credit scores range from 300 to 900 indicating your likelihood to pay your bills on time. So, if you handle credit products responsibly and pay your debts on time, you should be able to build the healthy credit profile you want.

Once you begin building a credit history, various parties will be able to see your credit scores for different reasons. For instance, banks, credit unions and private lenders will sometimes inspect your credit scores to see if you’re creditworthy when you apply for financing. 

The closer your scores are to 900, the stronger your credit is, so it should become easier for you to get approved for large amounts of financing, low-interest rates and appealing payment plans. However, not handling your credit products responsibly can eventually result in bad credit scores of 300 – 600, which will have the complete opposite effect. 

What Factors Affect Your Credit Scores?

While your credit scores can be calculated in many different ways, there are five common elements that can generally cause your credit scores to fluctuate:

  • Payment History (~35%) – Since they usually have the greatest impact on your credit scores, it’s best to pay all your credit-related debts on time and in full. That includes credit card bills, mortgage payments and anything else that shows up on your credit report. Any late, incomplete or missed payments may decrease your scores. 
  • Debt-To-Credit Ratio (~30%) – The amount of revolving debt you’re currently carrying compared to how much you have available can affect your scores too. Typically, lenders like to see a ratio of 30% or less. Higher ratios may result in negative impacts on your credit scores.
  • Credit Age/Length (~15%) – It’s also healthy for your credit scores to keep credit accounts open for as long as possible, rather than constantly cancelling and reopening them. Older credit accounts can help increase your credit age and show that you have experience, which may lead to better credit, particularly if they’ve been used responsibly. 
  • Credit Inquiries (~10%) – Applying for new credit too often may hurt your credit scores. Whenever a lender checks your credit, a hard inquiry will appear on your credit history for several years, which may lower your scores slightly.
  • Public Records (~10%) – Bankruptcies, consumer proposals, lawsuits, liens, and accounts in collections are other factors that are considered when calculating your credit scores.

Building Credit As A College Student FAQS

Why do I need a credit score?

Credit scores are used by lenders, creditors, landlords, and select employers to evaluate an individual’s credit worthiness. If you want to take out a loan, buy a car or house or rent an apartment, you’ll need a healthy credit score.

Why do I have different credit scores? 

In Canada, you’ll have multiple credit scores. Your credit score can vary based on the credit scoring model used and the information available on your credit reports. Not all lenders report your credit information to both credit bureaus, so when a lender, creditor, or credit bureau calculates your credit scores, it leads to different credit scores.  

Why do I have a zero credit score? 

A zero credit score means you do not have enough credit history to generate a credit score. If you don’t have enough information on your credit report for the credit bureaus or the credit score provider to calculate a credit score. 

Good Credit = A Healthy Education

Taking on too much credit is never a great idea. The worse your credit is, the harder it will be to get approved for new credit products with affordable rates and terms. On the other hand, if you’re able to handle your credit products responsibly, you may thank yourself later when you leave college with a diploma and good credit scores. Just make sure to borrow responsibly, choose a legitimate lender and always read the fine print.

Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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