How Canadian students can avoid becoming 'credit ghosts'

If you think there's nothing scarier than a ghost, then you haven't met a credit ghost! 

In its simplest form, a credit ghost is an individual with little or no credit history.

New research from RBC found more than one in five (21 per cent) Canadian students between the ages 18 to 24, either don’t have a credit score or don’t know what it is. Even among the 78 per cent who say they do have a credit score, more than one-third (37 per cent) can’t identify what that score is.

If this sounds like you, don't get spooked. You may simply be at the beginning of building your credit history, and there are steps you can take to get started. Here's what you should know. 

So, what is a credit score?

A credit score is a three-digit number, usually between 300 and 900, that lenders can use as a factor in assessing your creditworthiness. The higher the number, the better your credit standing. Your credit history can come into play in everyday milestones, including renting your first apartment, applying for a car loan or signing up for some phone plans.

The first step to stop being a credit ghost is to educate yourself. Don't let your score be a mystery; now is the time to find out where you stand. 

If you haven't used credit products before, you may not have enough credit history to have a score yet. If you do have one, checking your score can provide a snapshot of your credit history and help identify where there may be room to improve.

RBC Online Banking clients can access their score through the TransUnion CreditView Dashboard with no impact to their score, and track how it changes over time.

What affects my credit score?

There are many myths surrounding credit cards. RBC's survey found that 74 per cent of students know that paying credit card bills on time is important for a good score, while 69 per cent understand the importance of using credit responsibly over time.

But, some credit myths still persist, including the belief that carrying a credit card balance from month to month or closing an older credit card can help improve a credit score. 

To clear the credit ghost status, small habits like making payments on time, keeping balances managed, and giving your history time to grow can make a huge difference in your standing.

Things like whether you make credit card payments on time, how much available credit you're using, and how long you've had credit accounts can affect your score.

Students can also use RBC's Credit Score Simulator within the CreditView Dashboard to explore how different financial decisions could affect their credit score.

How to build a better credit score

The third and final step is to build credit before you need to provide it; after all, credit can become important before you even know it.

Securing milestones like a first apartment, car loan, and even some phone plans may involve a credit check.

That's why it's important to start building credit now, the earlier the better. Focus on small, consistent habits that can build your credit history over time, says RBC.

Credit ghost busters

This spooky season, learn more about how credit works and take practical steps towards understanding and building history.

Ready to stop being a credit ghost? Visit RBC's Credit Building guide to learn where you stand, separate credit myths from facts, and understand the steps you can take to begin building your credit history.