Building on Your Credit
As students, credit can seem like a mysterious or even intimidating concept. However, understanding how credit works—and how to build a good credit score—can set you up for financial success in the future.
Your credit score is a three-digit number that reflects your creditworthiness. It is determined by factors such as your payment history, credit utilization, length of credit history, and types of credit used. Banks, landlords, and even some employers can use your credit score to assess your reliability with money.
A high credit score can help you secure lower interest rates on loans, increase your chances of qualifying for a mortgage, and even improve your ability to rent an apartment. Additionally, a longer credit history is beneficial because it shows banks and lenders that you have been responsible with credit over time.
How to build a great credit score:
Open a Student Credit Card – Many banks offer student-friendly credit cards with lower limits. Use your card for small purchases and pay the full balance each month.
Pay Bills on Time – Late payments negatively impact your score. Always pay at least the minimum amount by the due date.
Keep Credit Utilization Low – Ideally, use less than 30% of your available credit. For example, if you have a $1,000 limit, try to keep your balance under $300.
Take Advantage of the Grace Period – Many credit cards have a grace period (typically 21-25 days) where you can pay your balance in full without accruing interest.
You can check your credit score for free through third-party services. Many banks also provide credit score updates through their apps.
A strong credit score can help you qualify for auto loans, mortgages, and even business financing in the future. Establishing good credit habits now will make your financial life much easier in the future.
Start small, be responsible, and watch your credit score grow—your future self will thank you!
How to Invest For Your Future
Believe it or not, there are more ways to make money besides getting a job. Investing is a form of passive income, meaning you can make money in your sleep. There are several different types of investments in which you can put your money into and watch it grow. The investment landscape constantly changes, bringing risk and great rewards to your wealth over time. It is essential to consider both risk and reward when deciding how and when to start making investments.
The first step in investing is to set up a clear goal and intention to determine how much you can invest, what risks you can tolerate, and whether you need the profits in the long or short term. One way to do this is by setting up a SMART goal for investing. It is always a good idea to start investing sooner rather than later as money grows through compounding, which is when money earns interest over time.
Different types of investments come with varying levels of risk. All the new terms, accounts, and options may be daunting for beginners, but many resources are available to help you get started. Investopedia created a graphic describing the investment risk ladder, which visualizes the risks for different types of investments.
The different types of investments include cash, bonds, mutual funds, ETFs, and stocks. Cash investments involve putting your money into a cash bank deposit, such as a GIC, which accumulates interest over time. Bonds are like loan agreements in which the money you invest is loaned to the company or bond issue, and you get interest in return. Mutual funds invest in a combination of stocks, bonds, and other investments managed by professional fund managers. ETFs, exchange-traded funds, are investment funds that are traded like stocks. Stocks are company shares that allow you to earn money through the company’s success and increases in stock prices and dividends.
In Canada, you can make investments through several investing accounts. A popular one that students can quickly get started with is the Tax-Free Savings Account (TFSA). Individuals 18 or older may create a TFSA and have annual contribution limits they can invest within without getting deducted from their income taxes.
Other types of investment accounts include: the Registered Education Savings Plan (RESP), First Home Savings Account (FHSA), Registered Retirement Savings Plan (RRSP), and Registered Disability Savings Plan (RDSP).
References
Chen, J. (2024, April 16). Investing for Beginners: A Guide to Assets. Investopedia. https://www.investopedia.com/articles/basics/11/3-s-simple-investing.asp
CIBC. (n.d.). Investing 101 for Students . Www.cibc.com. Retrieved January 30, 2025, from https://www.cibc.com/en/student/student-life/investing-101.html
Financial Consumer Agency of Canada. (2016, May 27). Credit Report and Score Basics. Www.canada.ca. https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/credit-report-score-basics.html
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