Credit score: How do I build a credit file as a student or young adult in Canada?

Your credit history can have an impact on the rest of your life. A good credit score will help you get through the most important stages successfully. As astudent or young adult, having good credit will help you buy a house, a car or even get a loan.

Whether you’re heading off to university in the fall or have just graduated, having a good credit history is essential to living well. Keep in mind that it’s never too early to start building a good credit history. It’s even better to start on the first day of your 18th birthday!

Here are a few things you need to remember to build and maintain a good credit score.

You’ve probably heard the term credit score or credit rating thousands of times by now. Building a good credit history can be confusing if you don’t even know what a credit score is. A credit score is a means by which various financial institutions evaluate your ability to repay your debts.

No company wants to do business with someone who is notorious for late payment. Or someone with a low credit score. A low credit rating means you’re less likely to repay the full amount on time, if at all. This is a huge risk, as a poor credit rating can prevent you from achieving goals such as buying a home or car in the future.

Companies and lenders want to know that the risk they take in lending you money will be worthwhile and not a loss. This is further accentuated by places like car dealerships and people who enter into a leasing agreement with you. These people want to know that you are going to pay them what you owe them on time. So the higher your credit score, the greater your chances of success with financial institutions.

Your credit score is based on information that lenders submit to the credit bureaus.

On average, credit scores can range from 300 to 850. However, several factors can modify or affect your credit score. These factors include :

• The total amount of debt you have accumulated.
• The number of loans you currently have and the payments you have made on them.
• The number of credit cards you have opened and the average age of your accounts.
• Available credit utilization ratio.
• The number of late payments you’ve made, and whether you’ve made any payments to pay off your debt.

Different factors have different weights. Thus, having many credit cards but making good payments is considered preferable to having one credit card but making no payments on it.

The following guide explains in detail how credit scores are calculated in Canada:

A good credit score gives you additional advantages such as :

• Lower interest rates on your loans.
• A better chance of being approved for other loans.
• Higher limits on your credit cards.
• Greater access to a wider choice of credit cards.
• Your credit score can even have an impact on your insurance payments and on whether or not an apartment or house you want to rent is approved.
• Finally, even employers attach the greatest importance to your credit score. In some cases, future employers won’t hire you if you have a bad credit score.

Your credit score indicates how fiscally responsible you are, which is essential for a financially stable life.

Now that you know how crucial a good credit score can be to your standard of living, here are a few simple ways toimprove your credit score:

You can’t know whether your credit score is good or bad if you don’t look at it.

If you don’t know how to check your credit score, here are two guides to help you:

You must request a credit report from one or both of the two main credit-reporting agencies: Equifax and Transunion. Some banks, such as CIBC or Scotia, allow you to check your credit rating via their customer platform.

Checking your credit history and credit score is crucial in more ways than one. Not only will knowing your credit score help you find out what you need to improve, but reading your report will also ensure that no errors have crept in and no fraudulent actions have been taken on your behalf.