The scores that matter post-grad
Femi Kassim
Even though many students are convinced they will never need a car, house, or any other large ticket item that may fuel the corporate machine, very unscientific polling suggests the time between graduation and panicking about credit is about five minutes. If you’ve read a newspaper in, say, the past year and a half, you probably know that the days of American mortgage brokers giving loans to anyone with a pulse are history. So be prepared!
Your FICO (named after the Fair Isaac Corporation) score is a numerical interpretation of your credit worthiness. Since current income is often not an appropriate barometer, it is supposed to be a tool for lenders to evaluate potential borrowers’ abilities to pay back loans in the future. Whether you are granted a loan, a mortgage, or a car lease often depends on this score. It ranges from 300 (worst) to 900 (best.)
You can check your score via one of the three credit reporting services in Canada: Equifax, TransUnion, and the North Credit Bureau. Equifax is the most popular. They have a reasonably priced service, called ScorePower, which provides your credit report including your FICO score for $23.95, and you can access the report for 30 days. Equifax also offers a year-round monitoring service that will alert you to any sudden changes in your credit score or other potential problems such as suspected identity theft.
How do I improve my credit score?
While not having to rely on credit at all throughout your college years may sound like the best way to demonstrate your ability to support your own expenses, it’s almost impossible, and not even ideal. Most scoring models require several months of a credit history to generate a score. Getting approved is just as difficult with no credit score as it is with a 300, if not worse. Luckily for students, you will probably have plenty of chances to build a history. Here are some tips:
Pay your bills on time: This might significantly determine your credit score. However, paying your telecommunications giant of choice a few days late won’t crush you.
Get a credit card: Most banks offer student cards with extremely low rates and no yearly fee. You will have a fairly low limit as well-perfect for the froshie who may be tempted to make one too many SAQ runs when they realize they have “free” money. Make a few purchases on it, and pay down the full balance each month. It should be a stand in for your debit card or cash, not an additional source of spending.
Don’t get any more credit cards: Recent applications for new credit are taken into account in your FICO score.
Post graduation, don’t forget your student loans: While the low interest rates on government sponsored loans may be tempting enough to ignore, this will likely be the longest term debt repayment you will have on your record until you secure a mortgage.
Source: McGill Tribune
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