What is a Credit score, really? And why students should care now?

If you’re a student, there are odds that you’ve heard of the term “credit score” thrown around by parents, people in adult conversations, banks or in personal finance. It might sound like something that only matters when you're old enough for managing finances but here's the truth your credit score can start mattering way sooner than you think.

So what is a credit score, really and why should you, a student juggling classes and exams, care about it now? Well let’s break it down by understanding:-

• What is a credit score?

• How is it useful now and for the long term?

• Why should students care about it now?

  
  

What is a Credit Score?

A credit score is a three-digit number that rates your creditworthiness. Credit scores generally range from 300 to 850. The higher the score, the more likely you will get approved for loans and better rates. Lenders use credit scores to evaluate your creditworthiness or the likelihood that you will repay loans in a timely manner. A student’s credit score is a three-digit number that reflects their creditworthiness, indicating how likely they are to repay debts.

It is a crucial factor when applying for education loans, which most of us will surely do, for student credit cards, with a higher score increasing the chances of approval and potentially leading to better loan terms.

How is it useful now and for the long term?

Maintaining a good and high credit score can proof to be very beneficial for your upcoming future rents, loans, transactions, buying things, for payments etc. A few of them are defined below :-

1. You’ll Need It Sooner Than You Think

Want to rent your first apartment? Get a car loan? Buy a plane ticket with a credit card? All these things often require a credit check. Without a good score, you might need a co-signer or face higher interest rates.

2. Good Habits Start Early

Building good credit is about being consistent. Starting now with a secured credit card or student credit card, and paying it off in full every month, sets you up for long-term success.

3. Better Rates = More Money in Your Pocket

When you eventually need a loan (car, home, or even a personal one), a higher credit score means lower interest rates. That can save you thousands over time.

4. It’s Part of Adulting

Understanding and managing your credit is a core part of personal finance. The earlier you get comfortable with it, the more control you'll have over your financial future.

Why should students care about it now?

• In the long term, lenders tend to favour individuals who have demonstrated financial discipline, making future borrowing hassle-free.

• A good score can unlock easy access to credit for unexpected expenses.

• Credit offers flexibility in managing short-term financial challenges without strain.

• By managing and improving credit scores, students develop financial independence and skills such as budgeting, debt management and making sound financial decisions.

•  As students build their credit score, they gain access to higher credit limits and better reward programmes such as cash back, travel points and other incentives.

• With new non-banking financial companies introducing repayment options such as Partial Interest, students become financially prudent from the start of their academic and loan journey, contributing towards building a stronger credit score.

  
  

A credit score might just seem like a number, but it has the power to shape major parts of your future. As a student, you have a golden opportunity to start strong. So don’t wait until “someday”, start caring about your credit score now and set yourself up for financial success before you even graduate.

Thus, establishing a good credit score during this phase is not a financial milestone but a long-term investment.

Always remember: Money talks but credit holds conversations.