Credit can be confusing (and stressful), but it can also have a positive influence on your finances. Here's how to avoid the debt drama that plagues so many Albertans.
Know your score.
Your credit score reflects your credit history over the past six years. Lenders look at your credit score to determine if they will lend you money. In Canada, credit scores range from 300 to 900—and the higher the better. Only 5 per cent of Canadians have a score of 850 or better. Check your score periodically to safeguard against mistakes and credit fraud.
Pay your bills on time...and pay as much as you can.
Making a credit card payment even one day late will hurt your score. If you're paying online, make the payment at least three banking days before it's due to allow time for processing. Setting up a small automatic payment to your card issuer each month will ensure you never forget to pay at least the minimum required payment.
And remember: the more you pay off, the less interest you pay, so try to pay as much of your debt as possible each month.
Never exceed your credit limit.
If you're close to maxing out your card, make sure you pay more than the minimum, or the interest due could push you over your limit. Going even $5 over your limit could lead to a costly fee from your credit card company. It will also hurt your score every month it happens.
Don't apply for store credit cards.
Even if you're just after a one-time discount for signing up, these cards, with interest rates as high as 29 per cent, are viewed negatively by the credit bureau and drag down your score.
Make your payments, and beware of closing accounts.
Even if you're in a dispute with a lender, make your payments. A missed payment will show up on your credit report. It can really hurt your score and it is very hard to fix. When closing an account, get it in writing that it is closed with a zero balance.
Don't close unused credit cards.
If you have a low-interest card you don't use, keep it open and use it periodically. Having a zero-balance credit card actually helps to improve a low score.
Don't apply for too much credit at once.
Don't lease a car, sign up for a new cell phone and apply for a loan all in the same month. The credit bureau sees this as a sign of financial trouble. Beware of being pre-approved by several lenders before you're ready to buy. Although you can check your own credit rating without penalty, preapprovals from lenders count against your score.
Feeling overwhelmed by your debt? It’s never too late to rebuild your credit and start saving for your goals.
Take Crystle for example.
"I used to live paycheque to paycheque and my credit was affected by past decisions, so I needed to rebuild."
“Her goals were to rebuild her credit and to one day buy her house,” said Andrew Kamitakahara, Crystle’s Personal Banking Specialist. “We made a plan to save for a downpayment and took it one step at a time.”
With the help of her banking specialist and the steps they created together, Crystle achieved both of her goals. “I put a plan in place to make my dreams come true,” she shared proudly.
For further advice about managing debt and using credit, contact us or visit a branch.
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