Pay more than the minimum
Your credit is this weird thing that can sometimes seem imaginary, because most people don’t get regular updates on it. In addition, a lot of people just don’t get how it works. Some question, “If I don’t pay my Visa bill on time this month, will it really make that big of a difference on my credit score?” Then you don’t pay it and you don’t see the repercussions, because lenders don’t always notify you after one missed payment. So one missed payment turns into another, and maybe another, but that’s because you were way too wasted at the bar and didn’t realize you were racking up such a high tab, so you tell yourself it won’t happen again. And the bank starts calling, just to see if you’re planning on paying your bill, and you tell them you will and you give them a date to pay it by, and you don’t hear from them again.
You don’t see them, of course, until you go to apply for a car loan, or a line of credit, or even try to buy a bed at Sleep Country, and you’re declined due to your poor credit. Now you’re stuck like this for a few years until you can prove to lenders, that despite not paying your credit card bill on time when you were in university, you really are good with your money and should be trusted with more credit.
How you use your credit card changes how lenders see you. Is your card limit maxed out? Are you paying the minimum payment on your card each month just to use what little credit there is available for a late night trip to McDonald’s or a quick trip to the LCBO? If your card is constantly maxed out, lenders are less likely to give you more credit. Try keeping it at least 10 per cent under the limit (i.e. $900 instead of $1000) if you can’t muster up the money to pay it off.
Which leads me to spending habits. There is a misconception that, as you earn more money, you will have fewer financial problems. The truth is that there is a significant amount of people who are living paycheque-to-paycheque, regardless of their income. If you’re unable to manage your money now (while you presumably have none), you’re not going to be able to manage your money when there are more places for it to go each month. Spend your time in university trying to pay off your credit card (and student) debt.
Think about it like this, if you have a $1000 credit card, if you were to not use it again, but only pay the minimum payment each month, it would take you eight years to pay off the card. Reconsider your spending next time you go to pay for a trip or another luxury on your credit card.
Also, make sure to manage the amount of credit you have available to you. Even if you don’t have money sitting on your credit cards, as long as you have that credit available to you, that’s credit that other lenders won’t be willing to give to you for other (potentially more desirable) reasons. For example, if you have four credit cards with limits of $1000, that’s $4000 less that a lender would be willing to give you for, say, a car loan. Before you apply for that Future Shop gift card, or another Visa with another institution, think about the credit you might need within the next few years. You should also be cancelling a maximum of one credit card per year in order for the cancellation to not affect your credit, because it can seem to lenders that you don’t trust yourself with that credit.
Take some time to educate yourself on how to improve your credit, and consider looking into a service that provides you with your credit score to stay on top of your financial well-being so you too can perfect being perpetually poor.