You do not need debt to build credit as a student, and you do not need to wait until graduation. What builds a credit file is a record of on-time payments on accounts that report to a bureau, and rent can be one of those accounts. Below are eight common myths about student credit, with what is actually true in Canada.
What Is the Difference Between Student Credit and Student Debt?
Student debt is money you borrow, such as a loan, and repay with interest. Credit, in the sense lenders use, is your track record: the history of how you have managed accounts, recorded in a credit report. The Financial Consumer Agency of Canada describes a credit report as a summary of how you have used credit in the past, and says lenders use it to decide whether to lend to you and at what rate. You can have a good record without having carried a lot of debt.
Eight Myths About Student Credit
Myth 1: You need a credit card to build credit
A card is a common first step, but it is not the only one. The FCAC notes that a credit report can also include accounts such as phone, internet and utility accounts when they are reported. Rent can count too, if a service reports it.
Myth 2: Checking your own credit score hurts it
It does not. The FCAC says checking your own credit report or score does not affect your credit score. What can lower a score is a lender checking it for a new application, which creates an inquiry.
Myth 3: You have to carry a balance
You do not. The FCAC lists carrying a balance on your credit cards among the habits that affect your score, and says your score goes up when you pay bills on time and use credit responsibly. If you use a card, paying the statement in full is the simplest approach.
Myth 4: No credit history is the same as bad credit
They are different problems. A limited history means there is little to judge, and the FCAC notes it can make it harder to borrow money or get a credit card. A poor history, with missed payments or debts in collections, is a record of problems. The first is fixed by adding accounts and time. The second takes longer.
Myth 5: Credit only matters when you buy a home
The FCAC says your credit report affects your ability to get a credit card, loan, mortgage or even rent a home, and that a poor or limited history may even affect getting a job. Landlords, phone and internet providers, insurers and employers are all on its list of those who may request a report, with your consent in most provinces.
Myth 6: Rent and phone bills already count
Not automatically. A bill appears on your file only if the account is reported to a bureau. Rent, in particular, is not reported unless a reporting service submits it.
Myth 7: Applying for lots of cards speeds things up
It slows things down. The FCAC lists how often you apply for new credit among the factors that affect your score. Apply for one account, use it carefully, and wait.
Myth 8: Rent cannot help you build credit
It can, when it is reported. Students who pay rent through a service that reports to a bureau can start a payment record without opening a card. TenantPay, for example, lets a renter join in about two minutes with no credit card, no existing score and no hard credit pull, and reports each on-time rent payment to Equifax at no extra cost, with no landlord participation required. Most members see their file update within 30 to 45 days, and results vary. Its site says students can build credit while renting in school and graduate with a credit history, not just a degree.
What Does a Good First Year of Credit Look Like?
By the end of a first year, a student who pays rent and a phone plan on time and keeps any card balance low can have two or three accounts showing a steady record. That is something a lender can work with, though no one can promise a particular score. The FCAC notes that credit bureaus update reports at least once a month, so each on-time payment shows up as it is reported, and a clean year is built one month at a time.
What Can a Student Do This Term?
- Set up rent so it is paid on time every month, and ask whether the service you use reports it to a bureau.
- Put your phone or internet plan in your own name and pay it on time.
- If you open a card, choose one with a low limit and no annual fee, and pay the statement in full.
- Keep balances well below your limit, since the FCAC lists being close to or over your limit among the habits that affect your score.
- Check your own report once or twice a year, and ask the bureau to correct any error.
Final Thoughts
Student years are a good time to start a credit file because the habits are simple and the benefits last. Pay what you owe on time, keep balances low, apply for new credit sparingly, and make sure at least one account you already pay each month is reported. You do not need to borrow heavily or hold a stack of cards to do this, and you do not need to wait for a first job. By the time you graduate, a year or two of steady on-time payments can mean you start your career with a file that lenders and landlords can actually read, instead of a blank page. Check it yourself now and then, and fix anything that looks wrong.
Frequently Asked Questions
Can I build credit while renting as a student?
Yes, if your rent is reported. Paying rent on time only helps your file when a reporting service submits it to a bureau.
Does my score affect my ability to rent?
Possibly. The FCAC says landlords may request your credit report, and that your credit history can affect your ability to rent a home.
How long does it take to see a result?
It varies. With TenantPay, most members see their file update within 30 to 45 days, and measurable change typically appears in 3 to 6 months of consistent on-time payments.
Which credit bureau does TenantPay report to?
TenantPay reports exclusively to Equifax, which its site says most Canadian lenders use for mortgage, auto and credit card decisions.
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