Five Common Money Mistakes Students Make

With the cost of post-secondary education rising, many students are feeling the pressure to maintain good grades and a part-time job. With students facing such busy schedules, they may lose sight of the importance of financial security planning.

Here are five common money mistakes many students make:

1. Overusing credit cards

They’re a familiar sight at college and university orientation events across the country – representatives from major credit card companies offering free event tickets or merchandise if you sign up with them. While young people are often excited to get their first credit card, credit card companies know many students won’t be able to make their payments on time.

Prove them wrong by paying off your balance each month before it accrues interest. This can also help build a good credit rating, which will come in handy when it’s time to borrow money for a car or a home later on. Also, keep an eye out for a credit card that offers a low interest rate. Many student cards do.

Common Student Money Mistakes

2. Abusing student loans

Remember that, while student loans offer low interest rates and interest-free terms, they’re designed to help pay for your education, not shopping sprees. If you dip into your student loan too often, you may need to get a part-time job, which could distract you from your studies.

  • Our 20s is a tumultuous time.

3. Not thinking about career plans

Sometimes taking a degree, diploma or certification in what you love means you’ll struggle to find a job once you’re finished school. Unfortunately, an education alone may not be enough to guarantee you a job after graduation.

Talk to people who’ve graduated with the same education. How long did it take them to find a job? What did they wish they’d done differently? LinkedIn was built for this, so use it to your advantage. Boost your resume now by signing up for supplemental courses, internships, a club, or volunteer opportunities. It’s important to recognize that, while all employers will look at your education, they’re also interested in your interpersonal and leadership skills.

4. Giving out financial information

Nearly one-third of all identity thefts happen to people between the ages of 18 and 29. Only use secure networks when sharing personal or financial information. Look for “https” at the beginning of the web address to ensure it’s a secure site.

It’s also important to avoid sharing credit cards and co-signing loans with friends. They may be a friend now but they could be a financial foe tomorrow, potentially leaving you with their debt.

5. Forgoing a spending or financial security plan

Many students spend first and ask questions later – a formula for landing in financial hot water. Budgeting is an invaluable tool for helping you stay on top of your finances. It’s important to cover your fixed expenses (rent, tuition, groceries) before you allocate your variable expenses (going to the movies, dining out, etc.). Budgeting websites can really help with this by categorizing your money automatically, meaning you have one less thing to worry about. These sites can even send weekly updates on your financial situation, keeping you in the loop.

Even at this stage in your life it’s important to identify your financial goals. With my help, you can create a plan that includes saving for all the things you want to do once you graduate.

Going into debt in your 20s isn’t the end of the world; sometimes, it’s a necessity. Although financial security planning is rarely taught in school, if you have the foresight to stay on top of your finances, you’ll have a leg up on many of your peers.

We All Have a Credit Score – What’s it Mean?

We all have a credit score – a number between 300 and 900 used by potential lenders, employers, landlords, and in some provinces insurance companies – to help judge our financial reliability. Yet, few Canadians know their credit number, or even understand how this rating is created and how their actions can change the score.

Unless you live in a mortgage-free cave with no Internet, two companies – Equifax Canada and TransUnion Canada – are tracking your every credit movement. Banks, utilities, former landlords and anyone else who issues credit and loans feed these two agencies the information that forms your credit history.

You typically need to provide consent for someone to see your report – check the small print in that lease application.

A good credit rating will not only help you secure loans, it will also help lower the interest rates you’re charged. There are many ways to improve and even rebuild your credit score.

Credit Score

They know what about me?

Canadians should regularly contact both Equifax and TransUnion to get a copy of their credit report for free. The agencies may charge fees for expedited service and to get your actual score. Mistakes happen so this is the time to fix them. Plus, in the age of identity theft, credit reports will show you if anyone has applied for a loan under your name. If you find an error on your report, you can request a correction from the reporting agency and, if needed, from the lender directly. If you are not satisfied, you are entitled to add a brief “consumer statement” to offer your side of a story.

The report includes basic personal information, including date of birth, current and former addresses, social insurance number, driver’s licence number and current and past employers. The credit history information lists your loans, bank accounts, credit cards and any other form of credit, including telecom bills. Late payments, liens, bankruptcy judgments, debt sent to collection agencies and repossessions are all included.

Where does it all begin?

A credit card is usually the first step in a credit history. Student loans and mobile phone plans are also tracked. Just like posting an ill-advised YouTube video, missing payments on that first credit card can haunt people for years. Credit issuers take many other factors into consideration. However, having no credit record could raise a warning flag in some instances.

Tips to score well

  • Pay your bills on time, ideally in full but always the minimum.
  • If you cannot make a loan payment, work with the lender to find a solution.
  • Don’t max out your credit. Regularly going beyond half of your credit card and personal lines of credit limits suggests you may have a spending problem.
  • Avoid looking desperate – don’t apply for too many credit cards and loans. If you are shopping for a car loan or mortgage, do it all within a short period of time, so those inquiries into your credit history are lumped together.
  • Read all your banking and utilities statements very carefully.
  • Stability matters so keep credit accounts open – even if they’re not used much.
  • When applying for a big loan or mortgage, consider decreasing the credit limits on your credit cards. A lender will consider unused credit a liability.
  • 1According to Equifax, about 57 per cent of Canadians have an excellent credit score of 760-plus.

Rebuilding credit takes time

It can take time to turn your credit rating around, but it’s possible. Black marks take up to seven years to be removed from your credit history. Bankruptcies are also removed after seven years but judgments can be renewed for up to 10 years.

There are ways to start turning things around. For example:

  • Apply for a secured credit card. Give the bank, say, $1,000 and ask them to issue you a card with a $500 or $1,000 limit.
  • Ask a relative with a strong credit score to add you to their approved user list on their credit card.
  • Ask a relative to co-sign for your credit card or loan.
  • Close credit cards or lines of credit you’re no longer using so they’re not part of your credit history review.

The majority of Canadians have earned an excellent credit score. Understanding how this all works can serve you well when negotiating loans and can help you achieve your future goals.