Do you have good credit, bad credit or no credit? In 2015, 56% of Canadians had never checked their credit score (according to Equifax). Whether you are buying a house, applying for a car loan or even interviewing for a job, your credit score can impact your success. In today's blog we will discuss a couple simple ways to protect and grow your credit score.
Credit scores are used to indicate how likely it is that you will repay a loan. Lenders use this score to determine how confident they can be when lending to you. In the eyes of the lender, the higher your credit score, the more trustworthy (credit-worthy) you are. If you have bad credit or no credit, lenders will be less likely to lend to you.
In order to calculate your credit score, Equifax Canada and TransUnion Canada compile your credit history and assign you a 3-digit score ranging from 300 to 900. Your credit history will include information about how much debt you have, your payment history and how long you have had access to credit. Missed or late payments, high credit card balances, and too many credit accounts are some of the main factors that can reduce your score.
Here are a few simple ways to increase your credit score:
Make payments on time:
Whenever possible, pay off your credit cards and lines of credit in full and on time. At the very least, make sure you are making your minimum payments ON TIME. Missing a payment can result in a negative hit to your credit score.
Credit Utilization:
A fancy term that describes how much of your available credit is being used. Most experts recommend keep your credit utilization below 30%. For example if your credit card limit is $1000, you should aim to carry a balance of less than $333. Managing your credit utilization shows lenders that you are in control of your credit use and can use it responsibly.
Length of Credit History:
In order to prevent your available credit from shrinking, it is important to keep your oldest line of credit open. The longer your credit history is, the more confidence lenders will have when lending to you.
For a further breakdown of credit-building habits, check out this blog at Credit Karma. Credit Karma offers a free app that allows you to check and monitor your credit score.
Disclaimer: Choice Wealth Management has no affiliation with Credit Karma.
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