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How to Build Good Credit as a Student

By Joshua Cameron

Published October 27, 2020 • 3 Min Read

Building good credit as a student is one of the most important things you can do to set yourself up for future financial success — but what does that even mean? Here are some quick tips to make it easy so you can start building good credit right away.

What is credit, and why does it matter?

Your credit history or credit score is a record of how responsible you are for paying back any money you borrow. Having a good credit score helps give you more options and more financial flexibility. Here are a few reasons why:

1. Loan application approvals

Whether you’re applying for a credit card, a loan for that car you’ve been eyeing, or even a mortgage in the future, having a good credit score will make it more likely your application will be approved.

2. Easier approvals when renting

Landlords will often check your credit score as part of the rental application process to get a better understanding of whether you’ll be able to pay rent on time.

3. Credit checks for work

Some employers will perform credit checks before hiring job applicants.

So, how do you build good credit as a student?

There are a few key ways to start building a good credit history as a student:

1. Get the right type of credit for you

Choosing the right kind of credit for your needs is super important for building good credit history early on. Common forms of credit include credit cards, student loans, personal loans, and lines of credit. As a general rule of thumb, consider using a credit card for smaller expenses that can be paid of quickly, for larger ticket items like tuition or your first car, consider exploring loans. Different types of credit will have different interest rates and payment terms. Be sure to speak with an adviser at your local bank to determine what is best suited for you.

2. Pay your balance on time, every time

This is a huge factor in building good credit. Even if you are unable to pay your full balance each month, remember to at least pay the minimum!

3. Avoid your credit limit

How much credit you use in comparison to the amount of credit available to you is called your “credit utilization.” Experts recommend keeping your credit use below 30% of all your available credit sources for a higher credit score. That means if your monthly credit card limit is $3,000, try keeping your balance around $1,000 every month.

4. Keep an eye on your credit score

Credit scores in Canada generally range between 300-900, and the higher the better. Your score improves the longer you have credit and when you make your payments on time, which is why it’s best to start building credit right away.

Ps. RBC Clients can check their credit scores for free through RBC Online Banking.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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