UCU Credit Cards – Helping Students Build Good Credit

Congratulations! You turned 18 - and you are about to start your new journey as a university or college student. Your area of study will set the stage for your career - and the financial choices you make during school will lay the foundation for your financial future. Make the right choices early on and enjoy the many benefits for years to come.

Building a good credit history is one of the most important things you can you for yourself and your financial future. A good credit score can help you get approved for a mortgage, car loan and credit cards – it will also help you when applying for certain jobs, a new apartment, car insurance, utilities and even cell phone plans.

The sooner you start building your credit, the more time you have to build a great credit score.

Here are some tips to get you started.

Learn How Credit Scores are Calculated

Your credit history can reveal a lot about you to a potential financial lender, landlord or employer. A good credit score will help you get a loan with better interest rates and a bad credit score can hinder your chances of being approved for a loan.

Here is how your credit score is calculated.

Payment History - 35%. Your payment history is just like it sounds – it’s your history of repaying your debts. This includes the number of times you made on-time monthly payments - and it also lists your late or missed payments.

Takeaway – strive to make your payments in full each month or at least make the minimum payment and avoid late or missed payments.

Used Credit vs. Available Credit - 30%. This is the amount you owe compared to the credit you have available. Also known as the credit utilization ratio – it is the amount you are currently borrowing divided by your credit limit. As your credit utilization increases, your credit score can go down. Lenders view high credit utilization as a risk for defaulting on a loan because a significant portion of your monthly income is going towards paying your debts.

Takeaway – keep your credit utilization below 30% to prevent your credit score from going down. For example – if your credit limit is $1000 then your monthly purchases should be typically below $300.

Credit History - 15%. This is how long you have credit – including how long your oldest and most recent accounts have been open.

Takeaway – a long credit history signals to creditors that you can responsibly handle your credit accounts over time.

Public Records - 10%. This is a list of bankruptcies or collection issues related to you not paying your monthly balances.

Takeaway – Strive to have this section empty as any recorded issue may have a significant negative impact on your credit score.

Inquiries - 10%. Anytime your credit file is accessed for any reason, the request for information is logged on your file as an inquiry. Too many inquiries for your credit information can lower your overall credit score. 

Takeaway – Limit the number of times you apply for a credit card or other credit.

Get a Credit Card

If you are enrolled in a post-secondary institution and have a source of income then getting a credit card is a great place to start if you want to build good credit.

UCU Credit Cards offers students a Mastercard with a relatively low credit limit - making it easier for you not to overspend. A lower credit limit will also make your monthly payments manageable.

The UCU Collabria Cash Back Mastercard offers cash back for certain purchases making it an attractive first credit card for students.

More information about UCU Credit Cards can be found on our website.

Use Your Credit Card Responsibly

The key to building good credit with a credit card is to use your card wisely. Avoid spending near the upper credit limit on your card to keep your credit utilization ratio low. And try to use your card for purchases you can pay for right away – this will reduce the chance of you getting into debt.

Pay off Your Balance Every Month

If you can, pay off the entire balance of your monthly statement – this will help you maintain a solid payment history. Pay at least the minimum amount each month on time to avoid late or missed payments that will negatively impact your credit rating.

Make Regular Payment on Your Other Loans

Make regular payments on a student line of credit or student loan. The repayments of these loans show up on your credit report history and contribute to your overall credit rating. A late or missed payment can result in a lower credit rating,

Don’t Apply for Too Many Credit Cards at Once

Applying for several credit cards at once can lower your credit score since new credit inquiries make up 10% of your score.  

Check Your Credit Score

Monitor your credit score to check for any errors that could damage your credit rating. There are two main credit bureaus in Canada: Equifax and Transunion. Contact one to request your credit report.

For more information visit your local UCU Branch and speak with one of our loan experts.