Should you sign up for that credit card on campus?

Article Highlights:

• A credit card can help you start building your credit history, which can help you achieve your financial goals after graduation.

• Credit scores and your credit history help lenders, creditors and others decide whether or not to “take a risk” on you. The risk might involve giving you a loan, offering a credit card, approving your apartment rental application, or even offering you a job.

• A credit card can only help you build a positive credit history if you use it responsibly. That includes paying at least the minimum payment on time, every time, and keeping the credit card balance below your limit.

Starting college or university is an exciting time. You’re meeting new friends, discovering new passions, and living on your own for the first time. 

Another first, and one that comes with significant responsibilities, is your first credit card. Whether you go to a bank or sign up for a credit card on campus during orientation week, getting a credit card as a post-secondary student may be easier than at any other time of your life. 

Why should you get a credit card?

A credit card is a powerful financial tool. It can make it easier to shop online, and provides credit for larger purchases and emergencies when you’re low on cash. 

Most importantly, a credit card helps you start building your credit history which can help you with everything from landing your dream job to renting your own apartment after graduation.

What are credit scores and credit reports?

A credit report is a summary of your credit history. Potential creditors and lenders may use credit reports, in addition to other information you submit in an application, to choose whether or not to approve your credit application — and at what interest rate. 

There are two nationwide credit reporting agencies — Equifax and TransUnion — both of which maintain consumer credit reports containing information reported to them by lenders, creditors and other sources. Some lenders may report information to both of them, just one, or sometimes none at all.

Credit scores are a number, generally between 300 and 900, and are calculated using the information available in your credit reports. They tell lenders, creditors and others  how likely you are to pay your bills on time. This helps them decide whether or not to “take a risk” on you. The risk might involve giving you a loan, offering a credit card, approving your apartment rental application, or being considered by potential employers.

Tips for choosing the right credit card and building a strong credit score

• Don’t apply for multiple credit cards at the same time. Every time you apply for a new credit card, the financial institution will review your credit report. That’s known as a “hard inquiry.” Multiple hard inquiries at the same time can drive your credit score down, which can make it harder to get credit in the future. 

• Does the card charge an annual fee? Banks and financial institutions can include an annual fee for using some of their credit cards, which they add to your statement. Before signing up, check if the credit card has an annual fee and make sure you can afford it. 

• Does the company report to a credit bureau? Ask if the financial institution reports to one of Canada’s credit bureaus. If it doesn’t, the credit card won’t help you build your credit score with the applicable credit bureau.

• Pay at least the minimum payment, on time, every time. If you can’t pay off the full balance, pay at least the minimum payment shown on your statement by the due date. If you don’t, the financial institution will report a late payment. Late payments stay on your credit report for six years and can negatively affect your credit score.

• Keep your credit card balance well below your credit limit. A higher balance compared to your credit limit may negatively affect your credit score.

• Check your credit reports regularly. You want to ensure everything on your credit reports is a true reflection of you, and not someone else’s bad behaviour. You can check your credit report and score for free.

As a student, you’ve got a lot going on and it can be hard to remember to check your credit reports. Equifax can help. When you subscribe to Equifax Complete PremierTM, Equifax will alert you to changes to your Equifax credit score and Equifax credit report.

A credit card can only help you build a positive credit history if you use it responsibly, so be sure your first credit card helps you start off on the right foot.