Should students have or even use credit cards? This is a highly debatable topic since so many feel that credit cards + students often equal financial disaster. Because of this, banks and financial institutions have become more risk averse than before in the aftermath of the recession and the financial meltdown, when defaults grew at an alarming pace. More and more banks now offer credit only to people they deem financially responsible.
Banks use credit scores as reported by the major credit reference agencies, such as Experian and Equifax, to determine whether an applicant is in good standing. What this means is that people who have a credit history often lose out during the credit application process. There was once a time when being a student without a credit history meant easy approval for a credit card.
Most students and new immigrants may not have a credit score at all. Extending loans to people without a credit score is a risk for the banks, as they have no indication of the applicant’s likely behavior when it comes to managing their finances, or repaying loans. For example, when a utility bill has not been paid and the provider has passed the payment to a collection agency, there will be a negative impact on the payee’s credit score. Being a new player to the world of credit, students don’t have a history to demonstrate financial responsibility to the banks.
Each application is considered on an individual basis. Having obtained the card, it becomes very easy to build up a good credit score. Building up a good credit score is an investment, as it opens up access to affordable loans in future. It also demonstrates dependability to potential employers, landlords, and others.
Tips To Increase Credit Score
The basic method to improve credit score is making timely payments. All aqua credit cards offer an interest free repayment window of 51 days on purchases. Students who make full payments within the interest free period and handle their credit card responsibly will start to develop a positive credit rating, as timely payments contribute to high credit scores.
Building a good credit score however requires more than simply making payments on time. It requires handling bills responsibly, and managing finances well. The major credit reference agencies, Experian and Equifax, assign a high credit score to people who do not over-extend or top-out their available credit. Taking out credit in moderation requires preparing a budget, tracking spending and scheduling on time payments. It is a responsibility over and above simply making payments on time. All aqua cards offer reasonable credit limits allowing students to remain well within the limits.