You know the saying: money isn’t everything. But let me tell you – not having it can be.
Let’s talk about bad credit scores for a second. Bad credit scores can seriously affect your ability to get a loan, rent a car, or get a place once you move out.
I’m an international student. Right before moving to Canada, I was in the market for a new phone. But I decided to wait, as I had found a few well-priced plans in Canada that offered some of the latest phones on contract. Soon after I touched down, I ran into a Wireless Wave and asked for one of the plans that I had researched online. Just as I was finalizing my payment, the rep asked me for a credit card – which I didn’t have. As a result, they couldn’t give me the phone. Because I didn’t have a credit card, they couldn’t check my credit score. I was super confused.
What is a credit score, you ask? Simply speaking, it’s a calculation that determines your ability to pay debts. Phone providers, banks, landlords, and others rely on it to determine whether or not a client/tenant will be able to keep up with their payments.
Therefore it’s essential to build a good credit score. And if you’re an international student like me, it’s important to build it right away, as it will make your life a lot easier.
Here’s how to build a good credit score:
Step 1: Get a Credit Card.
Owning and using a credit card is the best way to build your credit score. It shows banks and institutions that you’re able to pay debts that you accumulate throughout the month. CIBC offers credit cards to newcomer international students, with zero annual fees and without a security deposit.
Step 2: Use Your Credit Card, But Don’t Pay It Off Right Away.
I always wait for my bank statement before I pay off my credit card – not the same day that I make a purchase. If you pay it off right as away, you’ll end up having $0 due at the end of the month. And while that might give you peace of mind, you won’t build any credit history.
Step 3: Make Sure You Have (Or You Will Have) The Money To Pay Off Your Credit Card Before You Make A Payment.
I learned this the hard way. Not settling your statement affects your credit score. But that’s not all – it also accumulates interest ranging from 18-23% per month! On top of not being able to get a new phone on contract, you’re going to see a heartbreaking $50+ fee in your account.
TIP: DO NOT Let banks fool you with a minimum payment option – even if not paying your full due payment doesn’t affect your rating, it will accumulate interest that you’re going have to pay to the bank.
Step 4: Pay Your Telephone, Utility, Or Other Bills On Time.
Not paying your bills can directly affect your credit score, as it shows your inability to pay off debts. Coming back to the phone example, make sure you get a phone plan you can afford for the whole duration of the contract.
TIP: Always calculate whether getting a phone on-contract is cheaper than buying a phone at the store and getting a separate plan.
Step 5: Buy Smart – Know Your Income And Expenses.
It only takes three seconds to tap a credit card and buy that $80 sweater that goes well with your new pants. Before you make any purchase, make sure you’ve written down a budget on how much are you going to spend on what. There are different mobile apps (i.e. QuickBooks Accounting, Spending Tracker, My Budgets, etc.) that let you predict your spending allowance for different purposes based on your monthly income. I ended up saving $100+ at the end of the month once I started using these types of apps.
International Students: If you’re willing to stay in Canada for more than six months, the steps above will make it easier for you to enjoy life to the fullest. Invest your time in getting a credit card in very first days you move to Canada. Over time, you’ll fully understand the importance of building your credit.
And to all students, remember: money used from the credit card is not your money, and should be paid back.
*Opinions expressed are those of the author, and not necessarily those of Student Life Network or their partners.