Keep your credit utilization eye level!
The Importance of Establishing a Solid Credit Profile
Almost every major purchase today will require you to borrow money from a lender. You’ll be able to get lower interest rates if you build up a good credit profile. You may also have trouble getting a job or a place to live if you have a poor credit score. Employers and landlords access your credit score.
You can even have relationship problems if you use (or misuse) credit cards. According to a survey, Canadians wish they’d talked more about money before they got married.
Credit Cards: Helping or Hurting Your Credit!
These are some ways credit cards can help and hurt your credit.
Paying late on a loan or credit card bill is the fastest way to ruin your credit. Paying your credit card bill late can also hurt your credit. You credit score is mostly determined by your payment history. Accounts in collections, or those that default, can stay on your report for a long time.
You’ll generally have a better credit score over time if you pay your credit card balance on time and in full every month. Keep your account in good standing if you can’t afford to pay the full balance before the end of your grace period. It’s usually your minimum balance due, usually 2% or $15.
Usage of your credit!
This is how much of your available credit is being used. Utilization determines your credit score second only to credit score. A lot of credit use may make lenders think you’re a higher risk, and that will hurt your credit (even if you pay your credit card bill in full every month.)
Keep your credit utilization below 35% of your available credit if you want to improve your credit profile. You shouldn’t carry more than $1,750 on your credit card, for example, if your limit is $5,000. When you have a credit utilization over 50%, some experts recommend getting higher credit limits – or more cards. If you’re in control of your spending, it’s a good idea. Just be responsible.
Having a long credit history makes lenders more comfortable lending money than someone with no history. Credit card accounts are better for your credit score the longer they’re open and in good standing. Which is why people tend to get their first credit card first!
You can hurt your credit score by closing old credit card accounts. Most of the time it’s because of changes in credit utilization, not because the account is old. Even after you close the account, your payment history will stay on your credit report.
Credit history is used by lenders, employers, and landlords to assess an applicant. It’s important to use credit cards responsibly to avoid long term consequences. It’s better to have your credit card work for you than against you in the long run.
Our seasoned mortgage professionals at MortgagePRO Ltd are not only searching a mortgage for You, but analyzing Your credit, in case You are not ready yet. We provide sound advice how to set yourself up for the future, even if You are not able to qualify for a mortgage. We also have solutions for people with not so good credit, but must have 20% down payment!