Credit scores—you know they’re important, but it’s not always clear how they work or why they matter.
Credit scores are used by financial institutions, landlords, and employers to determine how responsibly you use credit products.
Your credit score measures how punctual you are with paying back what you owe.
“The biggest factor in having a strong or weak credit score is whether you make payments on time,” says Ethan Sitter, Personal Banking Advisor at Cambrian. “But there are other factors as well.”
Sometimes, it can feel like everyone else knows the “unwritten rules” of having a good credit score—except for you!
That’s why today, we’re clearing up what affects your credit score and how to improve it:
Credit scores are a measure of how you manage money. When you borrow money, how soon (and how often) do you pay it back?
All kinds of factors play into your score, including:
“If you have a significant financial event like bankruptcy, a consumer proposal, collection, or legal judgment, those will all have a negative impact on your credit score,” says Ethan.
A good credit score helps you get approved for various credit products, including car loans, personal loans, mortgages, credit cards and lines of credit.
“With a lower credit score, you have a higher risk profile. You’ll have greater difficulty acquiring lending, and you’ll typically pay a higher interest rate,” says Ethan.
A better credit score helps you:
Here’s the good news: Even if you have no credit history or a lower credit score, you can always improve it! And you can start today.
Start by building these habits into your daily life:
Never had a credit card before? Your credit history is one of the key factors in your overall credit score.
“Start by getting a Cambrian Mastercard® with a small limit. Then, make sure to pay it off regularly,” says Ethan.
“Make sure your cell phone plan is in your own name, so you can build your credit history with regular payments.”
“And if you need to take out a loan (like a student loan), put that in your name as well, and have a parent as a co-signer.”
It’s a long-standing credit card myth that keeping a balance on your credit card is a good thing. It’s actually the opposite!
Not only will you pay interest on that outstanding balance, but you’ll also increase your credit utilization ratio. This is the balance you carry on your card relative to your limit.
In general, try to use less than 30% of your available credit at any given time.
Each time you apply for a new credit card, car loan, or mortgage, your credit score takes a slight hit. “Try to avoid credit-seeking behaviour whenever you can,” says Ethan.
“Rather than having 2 or 3 credit cards, stick to just 1. This can help you pay off the card regularly and ensure you don’t carry a balance over multiple months.”
“When you take on too much debt, you can consolidate your debt with a PayOff loan. You’ll save money on interest and have an easier time budgeting for your expenses,” says Ethan.
With a consolidation loan, you’ll simplify your finances by merging multiple debt sources into one monthly payment. Contact us to find out how Cambrian can help you get debt-free sooner.
Looking for a way to improve your credit score fast?
Unfortunately, there’s no shortcut. Building (or rebuilding) your credit history takes time. The key is consistency!
Follow the advice we’ve given above and bide your time. As the weeks and months go by, your score will gradually improve.
Whether you’re interested in our credit cards or debt consolidation, we’re here to help!
“A Cambrian Advisor can help you turn your debt into one manageable loan and monthly payment,” says Ethan.
Book a meeting with a Cambrian Advisor today and learn how to improve your credit score!
Disclaimer:
®Mastercard is a registered trademark of Mastercard International Incorporated.
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