Students told to build credit early

Financial advisers tell students at Dal to manage payments, control spending

Financial advisers Justin Mury and Katie LeJean speaking to students at Dal about building good credit. (Photo/Sara Leslie)

Students need to establish responsible credit practices while still in school, financial advisers said during Wednesday’s info session at Dal.

Students were told that managing their credit is one of the most important ways to set themselves up for success.

“A lot of jobs these days pull your credit report and will only hire people with good credit,” said Justin Mury, financial adviser at Credit Union Atlantic.

Building credit

Mury told students to first obtain credit, then use it regularly.  This builds a credit history, which lenders then use to approve additional credit if and when it’s needed.

But be careful not to overspend.  If students have a $1,000 limit on their credit card, and spend $998 that month, an interest payment of $3 will put them in the red.

Katie LeJean, another financial adviser at Credit Union Atlantic, said exceeding a credit limit, even by a few dollars, can affect one’s credit standing even more than a late payment.

Brittany Boot is a fourth-year student at Dal, set to graduate with a kinesiology degree this spring.  While Boot has a student loan, she acknowledges she has never checked her credit report online and knows little about how a credit score is calculated.

First-year King’s student Dawn Almeda says she too is confused about credit standing.

“From what I know about it, the better you are at making your payments, the better it is,” she says.

Boosting a credit score

While making credit payments on time is an important part of building a good credit score, Mury said paying a credit card off in full each month won’t result in a higher credit rating than someone who carries a small monthly balance.

Credit reports take a snapshot of an account’s balance at the time.  If there is no balance on a card, it looks as though the person is not using their credit.  Making the minimum payments on time while carrying a small balance each month shows the bank the user has the financial maturity to both use and manage credit.

Paying off student debt

Graduation can be a stressful time for those with student loans and lines of credit hanging over their heads.  A 2013 student survey commissioned by the Bank of Montreal found that Canadian students expect to graduate with an average debt load of $26,297.  The survey also found that students in Atlantic Canada expect it will take 7.6 years to pay down their loans, longer than any of the other provinces surveyed.

LeJean advised students to meet with their bank long before graduation to discuss what is expected in terms of a repayment schedule.

If they can, LeJean recommends students start paying down their loans before they graduate.  This allows them to make a dent in the actual principal (the initial sum that was loaned.)  After graduation, students have to start making interest payments on their loans, making paying down the principal harder.

She also cautioned students against consolidating their debt into one lump payment. Consolidation loans often have a higher interest payment than student loans.  Also, people who consolidate risk losing the tax credits associated with student loans.  LeJean told students to meet with their financial adviser when deciding what to do.

If students had to pay their tuition and living expenses out of pocket, most would not be able to afford post-secondary education.  Credit is something people use throughout their lifetime (to buy a car, or start a business…)

As Mury put it, “…you’re never going to be out of debt.”

The key is learning how to manage it.