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Young Canadians are increasingly unaware of their credit scores and the benefits of building credit.
More than 20 percent of those ages 18-24 are considered “credit ghosts,” meaning they have little to no credit history or don’t know what their credit score is, according to a recent report from the Royal Bank of Canada, and they lack knowledge about their credit.
Nearly 80 percent of respondents said they have a credit score, but 37 percent of those could not identify what their score was. Almost half said they are working on improving their score, but 28 percent are not sure if they are on the right track.
“What stands out is that students care about their credit, but many are still navigating without a clear sense of where they stand or what will help them progress,” Luciana Adragna, vice president of client segments and everyday banking at RBC, said in a press release. “There is a learning curve for young Canadians who are starting to make more financial decisions on their own.”
Not having a credit score makes it difficult for lenders to assess one’s financial reliability, which leads to challenges when buying a car, cell phone or personal loan.
It may also mean turning to an alternative lender, which may result in higher interest rates.
“Paying bills on time, keeping balances manageable and using credit responsibly can build a stronger financial record over time, which is really important when students are trying to rent an apartment, finance a car or get approved for a loan,” said Sara Son Hing, vice president of personal loans at RBC, in the release.
The result is that 42 percent of students said they have already experienced real-world consequences of not having a credit score, with 11 percent saying they had trouble getting credit card approval, eight percent had trouble getting a loan and six percent had trouble renting an apartment.
RBC recommends building credit early, tracking your credit score regularly and avoiding credit misinformation, such as the benefits of carrying a balance and canceling old cards.
“Credit is a financial skill best learned by doing,” said Son Hing. “The good news is that building credit is often less about big moves and more about being consistent.”
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Ana Bailão, chief executive of Build Canada Homes, said regardless of the market cycle, the country needs more homes, specifically more purpose-built rental apartments.
“We are a hands-on organization with the key goal of getting shovels in the ground to increase affordability and create housing that the market isn’t creating,” she told Bloomberg News.
This comes as Ottawa looks to get back into the business of building homes, having committed to financing about 19,000 affordable homes to date.
Bailão said she also received about 900 new proposals last year.
Canada Mortgage and Housing Corp. estimates that Canada will need more than 2.4 million new homes over the next decade to restore affordability.
Read more here.
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McLister on mortgages
Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you don’t want to miss. Plus, its mortgage rate page for Canada reviews the lowest national mortgage rates, updated daily.
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Today’s Posthaste was written by Ben Cousins with additional reporting from Financial Post staff and Bloomberg.
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