How to Build Your Credit Score

Here’s a quick look at what a credit score is, why it’s important and how to build a strong credit score now.

What is credit?

Credit is money you borrow. Common types of credit include: 

• Credit cards

• Student loans

• Personal loans

• Lines of credit 

How you borrow money and pay it back is your credit history. This is reflected in your credit score. Credit scores in Canada range between 300 and 900. A score of 740 to 799 is considered very good and above 800 is excellent. The longer you maintain good credit, the higher your credit score goes.

Why is this important?

A good credit score makes it easier to qualify for loans or credit cards and to get approved for a lease or cell phone plan. When you miss bill payments, your credit score goes down, making it harder to borrow money later.

Why start building credit as a student?

It takes time to build a good credit history. Starting early gives you the chance to show banks you’re a responsible borrower and someone they can do business with.

A good credit score means you’re more likely to be OK’d to borrow for bigger things down the road (think car or mortgage). It also can bring perks like lower interest rates and higher credit limits.

How to build credit as a student 

Here are a few simple ways to kickstart your credit history.

Get a credit card and use it wisely

Sign up for a no annual fee credit card in your name and use it for small expenses that can be paid off quickly. Pay your balance by the due date every time. If you can’t pay the whole balance, pay at least the minimum due to avoid late fees and credit score dings.

Pay for large items in full

For larger purchases — like vacations and furniture — set aside money regularly. Paying off a large credit card purchase is another way to boost your credit score. 

Pay your bills on time

Including your phone, utility bills, as well as your car loan and rent. Setting up automatic debits from your bank account can ensure you never miss a payment.

Don’t let your payments go NSF

It happens to the best of us, but a Not Sufficient Funds (bounced) cheque or payment can lower your credit score. Make sure you have enough money in your bank accounts to cover bill payments. Ask your financial institution about overdraft protection, which can help cover unexpected shortfalls.

How to maintain a good credit score

Keep an eye on your credit score. You’ll see your score go up as you make on-time, regular payments. Here are a few tips to keep it up:

Beware of identify theft and scams

These can hurt your credit score, even though they’re not your fault. Learn how to avoid identity theft and stay informed about the latest frauds, phishing schemes and other scams.

Check your credit card transactions.

If you notice anything odd, such as a purchase you don’t recognize, contact your financial institution right away to correct it.

Want to find out your credit score? You can check it for free at either of Canada’s main credit bureaus, Equifax or TransUnion. Or you can get free access to your credit score with RBC Online Banking

When it comes to building and maintaining a good credit score, there’s no time like the present! And having a good credit score now will serve you well throughout your life.

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