Repairing Your Credit In Canada

Repairing Your Credit In Canada

Timely paying your bills is quite normal for an average Canadian. Your punctuated when it comes to your card payments but you’re having trouble getting into the perfect credit category.  Are you acknowledging the steps you’re taking to damage your credit?

It isn’t hard to damage your credit score with all the myths about credit going around.  We often don’t understand how credit score is calculated that we assume what we are doing is right.  Paying your bills

Before trying to improve our score we got to acknowledge all the steps we are taking when it comes to damaging our credit.

We sometimes don’t let credit be a part of our lives.  Many people think that credit cards equal debt. Debt is bad, so credit cards must be bad too, right? Not right having little or no credit can be detrimental to your credit score. The whole point of a credit score is to show that you know how to handle credit. Having no credit history makes it difficult for banks and lenders to know your capability.  Debt is bad, but credit cards are not when used responsibly.

  Strategy: Limiting your credit card spending to a small percentage of your credit limit and paying your cards off each month will help keep your credit score strong.

We remove the cards or lower our limit. Canceling the extra card or lowering your credit limit is not a useful strategy to succeed in the credit world.    While these actions withhold your spending urges they could also damage your credit score. Here’s how: One of the major chunks of your credit score is a “credit utilization ratio” which measured your limit-to-balance ratio on your cards.  Your credit score could be affected negatively is the ratio rises.  Say your total credit limit is $5,000 and your total balance is $500. Your credit utilization ratio would be 10 percent. By cutting your limit to $2,500 your balance remains at $500 and the ratio would be 20%.

 Strategy: The higher your credit utilization ratio the more negative impact it is considered to have because it means you are spending more of your credit limit.

. There is only one type of credit.  We have credit cards, and your payments are on time, so you would think your credit is amazing.  Not exactly.  Avoiding different kinds of credit can also hurt your credit score. If you have a credit card without loans or mortgages, your score could be lower. Just the same as having school loans without a credit card can hurt your score.  The best way to ensure you’re maximizing your credit score is to keep different types of credit in your credit portfolio in addition to making payments on time.

  Strategy: Investing in a car loan or a mortgage can help your credit score.

We follow all the rumors about good debt.  A bad misconception about credit is that having a little bit of debt could potentially help your credit score.  The problem is the total amount of debt that you owe, along with your credit utilization ratio, is a big factor in calculating your credit score. Holding on to debt can not only hurt your credit score, but incur additional charges that you don’t need to pay.

 Strategy: The greater the advantage when you owe less.

We don’t check credit until we are in need of it.  Say it’s been a couple years since you checked your credit score. There was not a problem when you last saw it? Later you go to buy a car or apply for a mortgage and discover you’ve been denied because of your credit score. It’s only then that you check your credit score and learn that someone stole your identity years ago, opening credit cards in your name and destroying your credit. Now you can’t buy that car or house and figure out how to repair all the damage.

  Strategy: Your credit score can be affected by things outside of it.  Lenders could possibly make a mistake.  Your identity could be stolen with credit opened in your name. If you’re not regularly monitoring your credit score, these mishaps can drag down your score unbeknownst to you. It’s a wise idea to keep check  your scores once a year, or even few months before you think you might be doing some investment.  You could potentially get a credit monitoring service if you want to instant tabs on your credit.

There are two very important websites where Canadians can learn more.

Credit Reports, Credit Scores and Credit Repair by Federal Government of Canada

www.ic.gc.ca/eic/site/oca-bc.nsf/eng/h_ca02146.html

Credit Repair by the province of Ontario

http://www.sse.gov.on.ca/mcs/en/Pages/Personal_Finance_Credit_Repair.aspx

While all of this advice can help you raise your credit score, the most important piece of the puzzle is paying everything on time. Timely payments show that you know how to handle your credit without taking on too much debt.

Strategy: Remember the golden rule of obtaining a high credit score: less debt, more credit.

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