What’s the deal with credit?
“Credit” seems to be one of those terms floating around a lot these days, but do YOU know what it is? To get a better idea of what students know about credit, we decided to ask a few Humber and Guelph-Humber students what they thought:
James, First Year – General Arts and Science
“If you have good credit you can get a car and house. It has something to do with money.”.
Sanya, First Year – Post Graduate, Human Resource Management
“It is like your credit score, how the world or other businesses view you, to see if you’re liability or not.”
Florence, First Year – General Arts and Science
“Credit is something you build through years of living. If you have bad credit, I guess you’re in trouble cause life depends on credit.”
Trucie, Third Year – Graphic Design
“It is a guarantee that you’re going to pay back, like an amount of money, in a given amount of time. I think credit means a guarantee.”
How can we explain it?
Simply put, credit represents a temporary loan you can use to purchase goods. Different types of credit demand different interest rates you need to pay (on top of your purchase total). Keep that it mind when you’re strapped for cash or making a large purchase.
How does it work?
We asked tons of students but the overall response was, “I don’t know.” It’s unfortunate but only 6% of millenials are aware of the factors that contribute to a good credit score. Even though it sounds like a test you may not want to take, you need to build a credit history. Someday, when you want to buy a house, rent an apartment without your parents as co-signers, or even get a job, you’ll need that credit to show you’re financially reliable.
For now, your credit cards and student loans expect their money back. Problems occur when those payments are not made on time. When payments are late, it docks marks from your three-digit credit score. The higher the number, the better your credit. This tells potential lenders if you’re likely to make payments in the future.
So how can students ensure they don’t get bad credit? Make your payments on time, even your phone bill! Be wary of how much money you’ve got in the bank, so you don’t spend more than you can repay. If you’re currently struggling, here are some some great ways to manage your student debt.
Remember that IGNITE offers a ton of resources to help you better handle your finances, including a free Tax Clinic that runs between March 21 to April 21 every weekday from 10 a.m. – 4 p.m. and a variety of other Financial Services.