Keeping Up Your Credit Score

Your credit score is simply a three digit number that is used to let every financial institution you apply to know how reliable you are at paying off credits. These institutions from credit card companies, to banks, credit unions and private insurance agencies then use this score to decide if, and how much, money they are willing to lend you and on what terms. Obviously the better your credit score the better the deals you will be offered on credit cards, loans and insurances so keeping up your credit score is a must!

Factors Affecting Your Credit Score

Though no one can quite explain the exact science to determining a credit score, both good and bad financial histories are said to leave an imprint. Whether or not you’ve made late payments, overdrawn an account or filed for bankruptcy will all have a huge effect on your credit score. Other factors affecting your credit score include:

• Types of credit used in the past.
• Length of credit history.
• Payment history on past credits (up to seven years ago).
• Amounts owed on credit.
• New credit.

Building Up Credit

Many students find that they can’t have a bad credit score simply because they can’t get credit at all! If you have never used credit in the past but think you will need some in the future – for example to secure a rental or take out a car loan – try to start with a small amount of credit. Begin by approaching your own bank to see if they will issue you a credit card based on your account history with them. When you are first issued credit, make sure you get into good credit habits such as:

• Never maxing out your available credit, and in fact attempting to stay below half of the credit available.
• Always making payments on time, even if you can only afford the minimum due.
• Attempting to at least double the minimum due, thus paying off both some interest and some of your balance.
• Calling and personally speaking with a representative if you are unable to make a payment.
• Calling and personally speaking with a representative if you’re payment posted late.

Building Up a Good Credit Profile

Even if you don’t think you need much credit now, you’ll want to take steps to help build up a good credit profile. When you apply for a car loan, personal loan, mortgage or even just another credit card there are certain things a lender wants to see. Don’t give a lender any reason to turn down your credit request, so be sure to build up:

• Capacity. Credit lenders like to know that you will be able to pay off your credit so be sure that you have a history of consistent employment and income.

• Character. Credit lenders like to know that you have a history of paying off your credit so be sure that you have used some minor credit in the past and have always paid your bills promptly.

• Collateral. Credit lenders like to see that you have something of value, an asset, that you can use to pay off your credit if need be. Young people generally don’t have a lot of collateral when they leave school or university so making sure that you have a good credit history becomes even more important.

• Capital. Credit lenders like to see that you have some wealth, other assets, as a big picture snapshot of your finances. In general, try to make sure that you do have more money or assets than you have debts.

Obtaining credit as a student can be tricky, but it certainly isn’t impossible. Everyone needs to start somewhere and banks in particular understand this. Make sure that you set up a student account as soon as you enrol in university and build up a good credit history by using your money responsibly. Once you have a good financial history, speak with your bank about extending further credit to you so that you can begin building up, and keeping up, a good credit score.