Many students use credit, such as a credit card or a student loan, but not all of them use it wisely. Building a strong credit score early is essential to your future financial success. Having a strong credit score represents your ability to manage your money wisely, and this can impact you in a number of situations, such as qualifying for a lower interest rate on loans, which can make purchasing that new vehicle a bit easier.
The best thing you can do is to keep your credit score as high as possible, and there are a number of ways you can do that:
- Pay on time: Paying your bills by the deadline has the greatest effect on your credit score, so be sure to pay yours on time — even if they are small! No matter what, always make the minimum payment on your debts!
- Slow and steady: Try not to borrow more money than you can afford to pay back. If you take on too much debt at once, it can be difficult to recover.
- Manage your limit: It’s recommended that you aim to use less than 35 per cent of your available credit limit. The closer you are to your limit, the greater risk you face of not being able to pay it back on time. While is it best to pay your balances in full, even making the minimum payment is better than none at all.
- Length of credit history: It’s a good idea to start building credit early because the longer your history, the more accurate your credit score will be. Starting to build your credit now will help you when wanting to borrow for larger items in the future.
- Minimize credit applications: Just like it can be a bad sign to an employer if you got a new job every month, applying for additional or new credit too frequently can reflect negatively to lenders. It may leave the impression that you are struggling financially. Try to reduce the number of times you apply for credit over a relatively short period of time.