Welcome to The Ultimate Guide To Personal Finance For College And University Students, by Borrowell! In this five-part guide, you’ll learn about important personal finance concepts that will prepare you for the next few years of school and beyond. You'll learn why your credit score is important and how to check it, how to read your credit report, how to apply for your first credit card, how to get a bank account, and how to plan for your financial future. Part 1: Why Your Credit Score Is Important And How To Check It
You may have heard of the term “credit score” and maybe even have a basic idea of what it is. But do you know why it’s important?
Why is my credit score important?
Your credit score is essentially a measure of trust: it lets financial institutions know how likely you are to pay back credit. It’s an indicator of how well you meet your financial obligations, such as paying your credit card and phone bills each month.
The higher your credit score is, the more financial options you have available to you. It could also make it easier to get credit at lower (more attractive) interest rates.
Insurance companies also use your credit score as a factor in determining your premium payments. A good score could end up saving you thousands of dollars a year with lower monthly premiums across home, health, auto, and other forms of insurance.
How do I check my credit score?
If you're 18 years or older, you can check your free credit score with Borrowell.
If you’re new to Borrowell, you’ll be prompted to create an account by providing us with your email and creating a password, telling us a bit about yourself (residence, age, etc.) and sharing your financial goals. We don't ask for your SIN number or credit card number.
You’ll then be asked a few questions to verify your identity with Equifax, the credit bureau we pull your credit score from. Then, you’ll be able to view your credit dashboard! Your dashboard features:
Your credit score
Your credit report
Access to your personal Credit Coach
Key information about how to improve your score
Personalized financial product recommendations
Credit education tools and materials
If you’re unable to view your credit score, it may be because Equifax can’t verify you and you may be required to try an alternative method of verification. If you have a zero credit score, it may be because you’re new to credit and Equifax doesn’t have enough information to give you a credit score at this time. If you have a zero credit score, this blog will teach you how to build it.
New to credit scores? Check your free credit score with Borrowell in 3 minutes or less!
Why should I check my credit score regularly?
You can think of your credit score and report like a report card. How would you improve if you didn’t pay any attention to it? Here are a few reasons why you should monitor your score.
1. So you can know where you stand financially and monitor your credit over time
Many people may be afraid to check their credit score because they think it will lower it (it won’t with Borrowell) or are worried about the number they’ll see. But to improve or maintain it, you’ll need to evaluate how it is currently.
2. Gain valuable insight into what helps and hurts your score with Borrowell's new Credit Coach
If you’re headed off to school – you may (or may not) like to learn. Well, you can learn a lot from checking your credit score and report regularly and checking in with Molly, the Borrowell Credit Coach - Canada's first AI-powered credit coaching tool.
The Credit Coach does the hard work to understand all the unique factors that make up your personal credit score so that you don’t have to. Molly provides a free credit check, monitors your credit, analyzes your profile, and even sends you tips on what you can do to improve your credit score. But best of all, the Credit Coach is super easy to use and understand. She’ll tell you the top things you can do to improve your credit score, personalized to your unique credit profile. For example, she can provide quick reminders to let you know if you’ve missed a payment, or if your credit utilization (credit usage) is a little high that month.
Want to receive personalized tips to help you improve your credit score? Meet the Borrowell Credit Coach!
3. View your full credit report and understand what each item means
Credit scores seem to get all the attention, but checking your credit report regularly is also important! Your credit report allows you see any credit inquiries (checks on your credit by financial institutions), all of your trades and accounts in one place, and your total credit utilization (how much of your available credit you’re using).
You can also access your full credit profile and the Credit Coach on Borrowell's new mobile app.
The bottom line
As an incoming university or college student, your credit score is something you may want to start paying attention to!Part 2: How To Read Your Credit Report
Once you’ve got your credit score and report from Borrowell, you might be wondering what to check and how to understand your it. Here’s what you need to know.
Trades and Accounts
This section describes open and closed accounts that appear on your credit report. It includes loans, lines of credit, and credit card accounts that you may have. This section is divided based on different kinds of credit:
Revolving: Credit that has a set limit that you may borrow up to, and that is renewed as debt on the account is paid off. Examples include lines of credit or credit cards.
Instalment: Credit in the form of loans that have fixed, scheduled payments over time until the balance is paid off. Examples include car loans and student loans.
Mortgage: Credit that is used to buy a home or other form of real estate. The amount of your mortgage will show on your report, though the mortgage provider will not.
When creditors check your report to determine your creditworthiness, this is known as a “credit inquiry”. There are two different types of credit inquiries:
Hard Inquiries: Checks done by banks and lenders that will slightly affect your score and report negatively.
Soft Inquiries: Checking your score or report yourself or through a third-party service, like Borrowell (and doesn’t affect your credit score).
It’s important to monitor these inquiries to make sure that you’ve authorized them. A credit inquiry that you don’t recognize could indicate suspicious activity on your file, such as identity theft.
If you identify a concern that involves a theft or crime, report the incident to local police. You can also report scam or fraud to the Canadian Anti-Fraud Centre. Make sure to tell your bank, credit card companies, and credit bureaus (Equifax and Transunion); close any accounts and cards that may have been compromised immediately.
When payments on credit accounts are long overdue, they may be sent to third-party collections agencies to track down those payments. This will show on your report in the “Collections” section. This section includes information about the specific account, as well as the size of the outstanding balance.
A collections account in your credit report may considerably lower your credit score, so it’s important to pay bills in full and on time. If you have no accounts in collections, this section may be empty.
Legal items are any public record related to your credit, including:
Civil Judgments: Rulings that may be against you in a court of law related to non-criminal charges that usually require fines to be paid.
Tax Liens: Claims on your property placed by the government for late or non-payments of tax liabilities.
These will only show up in this section of your credit report if you have any. Otherwise, this section may be empty.
Bankruptcy: This section of your credit report will show if you’ve filed for bankruptcy or consumer proposal in the past. When you can’t pay your outstanding debts, you file for bankruptcy. Unlike a bankruptcy, a consumer proposal is an agreement where you submit a “proposal” to change how you pay off debt to creditors. Both bankruptcies and consumer proposals may negatively affect your credit report and score.
The bottom line
When you get your free credit score and report from Borrowell, make sure to check and analyze the important information from all the different sections of your report:
Part 3: How To Apply For Your First Credit Card And Why It’s Important
Trades and accounts
Credit cards are a convenient way to make purchases and are a great way to build credit. Heading to college or university, now might be the time to apply to get your first credit card.
Why is getting a credit card important?
Part of the ultimate guide to personal finance for college and university students is knowing and understanding how to use a credit card.
This may be necessary to start developing a credit history, which will determine your credit score and report.
1. Building credit early has major advantages for later in life
Similar to having a strong grade point average (GPA), a strong credit score will open doors to many opportunities in university life and beyond, including:
A strong and lengthy credit history is part of what determines your credit score, so responsibly using a credit card while in college or university can set you up for greater financial options later on.
2. A first credit card is a great learning tool (when used responsibly)
Having a credit card will help you understand how credit works. In university, you’ll need to learn to develop discipline and not overspend. You need to learn to make on-time payments at the end of billing cycles and be selective about your spending habits. Late credit card payments may also affect your credit score negatively.
If you don’t pay your balance off right away, interest charges will add to your monthly bills, often at a 19.9% interest rate. To avoid these interest charges, you should always try to pay off your entire balance – not just the minimum amount – when your bill is due.
3. A credit card can offer peace of mind when planning for the future
A credit card can be a great tool when an emergency situation calls for more cash than available in your savings, especially as a student. It’s on you to define what constitutes an emergency situation to rely on your card.
Try to protect the peace of mind a credit card can offer by having a plan to repay the debt quickly and affordably.
How to apply
With Borrowell, it’s easy to browse and compare a wide range of different credit cards based on your credit score. While there are many types of credit cards, such as travel and cash back, there are likely only a few basic categories that currently matter to you.
No Fee: A credit card that has no annual fee attached to it. This perk can save you over $100 a year.
Low-Interest: Cards that offer low starting APRs that increase after a certain period or a single low fixed APR. These cards can be used when consumers need to make large purchases, which they can pay back over time.
Credit Builder: A credit card ideal for individuals with zero credit or low-credit who are looking to build their credit. These cards are typically secured, meaning that users provide a cash deposit to lenders who offer this type of credit card.
Borrowell offers tailored financial product recommendations based on your credit score. To see your personalized credit card options, follow these steps.
1. Log in to your Borrowell account or sign up for one if you’re new to Borrowell.
2. Click on Credit Cards at the top of your dashboard. You'll also see numerous other products, including mortgages, that could be useful down the road.
3. Choose to filter by student credit cards, as well as card type, fee, network, and provider.
4. Browse through the recommended cards that match your criteria, and find the one that you prefer most based on the type, annual fee, APR, and bonus rewards.
5. Once you’ve found a card you may be interested in, click “View Product” and fill out the basic information on the card provider’s form to submit your application.
It’s important to note that as a student entering university with limited credit history, you might not have a lot of options in terms of choosing among credit cards initially. As you develop your credit over time, you’ll likely have more options.
The bottom line
As a student entering university or college, it may be a good idea to compare credit cards suited to your needs – but remember to use credit responsibly and to always make your payments on-time.
New to credit scores? Check your free credit score with Borrowell in 3 minutes or less! Part 4: Getting A Bank Account
If you don’t have one already, now is a good time for you to consider getting a bank account along with your first credit card. As with all financial products, it’s best to compare multiple options to find the best one for you.
What is a bank account?
A bank account is a useful and safe place to keep your money. You enter into an agreement with a bank where you deposit your money and they ensure it’s safe, secure, and convenient for your use.
You can access your money directly with a debit card the bank gives you, or through withdrawing money in cash from a bank branch or Automated Teller Machine (ATM).
What are some common types of bank accounts?
Different types of bank accounts offer unique services, charges, and benefits. Here is a breakdown of some of the more common types:
An account that is ideal for making everyday payments and purchases while keeping your money secure. Deposits, withdrawals, debits, transfers, and Interac e-transfers are all permitted with this type of account. These accounts typically offer very little to no interest and sometimes the monthly fees are waived for students. Be sure to watch out for hidden fees when selecting your account.
An account that allows you to earn interest compounded on funds that you’ve saved for future needs. Interest rates and other factors such as monthly service fees and minimum opening deposits vary between accounts and providers.
Tax-Free Savings Account (TFSA)
An account for Canadian permanent residents who are 18+ to set money aside tax-free throughout their lifetime. Annually, users can contribute up to $5,500 in their TFSA and contributions to TFSAs are not deductible for income tax purposes. TFSAs don’t just have to be a cash savings account: they can also contain mutual funds, certain stocks and bonds, GICs, and other investments.
How can I compare bank accounts?
You can compare different bank accounts using Borrowell’s recommendations engine to find the one best suited to your needs. Here’s a step-by-step guide:
1. Log in or sign up to view your Borrowell dashboard and go to the “Bank Account” dropdown under the “Recommendations” tab.
2. Filter search results by either chequing or savings accounts depending on your needs and wants.
3. Compare products based on key criteria such as interest rates, additional fees, e-transfer limits and fees, ATM fees, and internal transfers.
4. Click “Read More” for more information each of the options that interest you based on the initial filter criteria.
5. Once you’ve found the account option that works best for you, click “View Product” to open an account through one of our partner’s interface. Alternatively, Molly, the Borrowell Credit Coach, will also make recommend the best products for you. You can access the Credit Coach by downloading our mobile app.
The bottom line
Getting a bank account is a good way to keep your money safe, secure, and easily accessible. Common types of bank accounts include chequing accounts, savings accounts, and TFSAs. Assess your unique needs to figure out which accounts may be right for you. Borrowell allows you to compare your different bank account options through personalized recommendations.Part 5: Financial Planning For The Future
If you’re busy with class, new friendships, homework, and school clubs, you may not think you have enough time to start planning for your financial future. But guess what? If you’re able to find a bit of time to sit down and make a financial plan, your future self will be extremely grateful.
Managing Your Credit
A big part of planning for your financial future relates to how you manage your credit. Some important things to consider:
Understanding different types of credit
You should understand the different types of credit so you can determine which is right for you. For example, a personal loan may be appropriate for financing part of your education giving the extended payback periods and low-interest rates. Credit cards may be appropriate for small, day-to-day expenditures that you can pay back at the end of monthly billing periods – you get the idea.
Making on-time payments for amounts owed on your bills and credit accounts is crucial to having a strong credit score and report. As a university student, this likely means making regular payments on your student loans and credit card debt.
Building your credit history
The student loans and credit card debt you have while in college or university will act as important parts in building your initial credit history. How you repay these, will play a role in determining your credit score. Your decisions today may impact your ability to receive different forms of credit in the future, such as a mortgage or small-business loan.
Investing In Your Future
Investing is a tool that allows you to grow your wealth over the long-term. With the power of compounding, a small amount of money invested early on can grow exponentially over time.
Using Borrowell, you can explore investment options that you may be interested in later on in your adult life. These include:
Guaranteed Investment Certificates (GICs)
A a very low-risk Canadian investment that offers a guaranteed return over some period of time, usually issued by banks or trust companies. Due to their low-risk, their returns tend to be lower than most other investments, though higher returns can be achieved with longer time periods. With Borrowell, you can explore and compare different GIC options offered by our partner, EQ Bank.
Financial advisors and investment managers that provide tailored, personal financial advice to users based on mathematical rules and computer algorithms. These digital platforms typically allocate, manage, optimize, and rebalance client assets across investment products on the basis of risk and desired returns through automated software. With Borrowell, you can explore a hybrid robo-advisor product from our partner, Wealthsimple.
Insurance allows you to have the piece of mind that your car, home, apartment, and health have an extra layer of protection in the case of emergencies or unexpected events.
While there are many different types of insurance, we’ll cover the two that most likely apply to you:
A contract between a policyholder and an insurance company that protects the policyholder against financial loss in the case of a car accident, theft, vandalism, and more. In exchange for paying a monthly fee (i.e. – a “premium”), the insurance company agrees to pay for these losses as outlined in your particular agreement.
A form of property insurance that provides coverage for a tenant’s belongings, liabilities, and possible living expenses in the case of emergency or loss within a rented residence. It also protects against losses from liability claims that happen on the property (not due to structural problems).
When you check out your personalized product recommendations, you can compare insurance providers and find the right package for you.
Saving and Spending
Learning how to save money and developing proper spending habits is important in university. Here are a couple strategies to monitor and strengthen your saving and spending habits that you can use:
1. Create a budget with a ledger
You can use a ledger to record your income, expenses, and disposable income that you have available for your use as you wish. With this disposable income, you may want to budget beforehand an exact amount of money to spend on wants, and budget another amount to put into your savings or investments each month. 2. Find balance between spending and saving with Koho
KOHO is a smart spending account with no-fees. The account comes with a prepaid Visa card which earns cashback on every purchase, and an integrated app that helps you spend smarter and save more. KOHO is great for taking control of your money because you get insights into your spending and real-time balance updates after each transaction. Unlike most bank accounts, there are great features to help you build savings without even realizing it. You also have the ability to choose from a selection of colourful cards! You can use the code BORROWELL and receive an extra 1% cashback for 90 days when new users use this code on sign-up.
3. Set up a separate spending accounts
You may also consider having one chequing account dedicated entirely to spending on your needs, such as utilities or groceries, and having a separate chequing account dedicated to spending on your wants. You can choose to allocate a small, specific amount each month to the “want” account, and spend up to that amount without depositing anymore to make sure you don’t overspend.
The bottom line
Managing your credit, investing for your future, getting insurance, and creating good saving and spending habits are all keys to making and implementing a sound financial plan for your future.
Get your free credit score from Borrowell in 3 minutes or less. Getting your credit score is the first step to a great financial future.Congratulations!
You’ve made it through The Ultimate Guide to Personal Finance for College and University Students. To recap, here are some of the key takeaways from the series:
1. As an incoming university or college student, your credit score is a big part of your personal financial well-being that you may want to start paying more attention to.
2. When you get your free credit score and report from Borrowell, make sure you also check the Borrowell Credit Coach to see personalized tips to improve your financial well-being.
3. It’s important to consider getting a credit card while in university. As a student entering university, you can compare and apply for credit cards using Borrowell that are personally tailored to your needs.
4. Getting a bank account is a good way to keep your money safe, secure, and easily accessible. Common types of bank accounts include chequing accounts, savings accounts, and TFSAs. Make sure you assess your unique needs to figure out which accounts may be right for you. Borrowell allows you to compare your different bank account options through personalized recommendations.
5. Managing your credit, investing for your future, getting insurance, and creating good saving and spending habits are all keys to making and implementing a sound financial plan for your future.
We hope you’ve enjoyed The Ultimate Guide to Personal Finance for College and University Students! Did you learn some interesting tips and concepts? Tweet us and let us know. Now, get to class!