5 Surprising Things

5 Surprising Things Affecting Your Credit Score

When was the last time you paid for something with cash? Easy to do buying your morning coffee but checking into a hotel room or buying a beverage on a flight requires a major credit card.  You pretty much NEED credit today.  I’m all for using cash at times.  You should.  But if you’re living in our society today, you have to build a good or great score and maintain it.  And, for better or worse, that score changes every month based on your good or bad credit habits

What makes up your score?

It’s only a snapshot of your credit history – your loans, lines of credit, credit cards.  And just recently, your mortgage.  Many people are shocked that their mortgage might not have been listed on their credit report.  And, some lenders still don’t report it (check your credit report or with your lender).  So, if you were paying your mortgage on time but a little late with your credit cards, you could have a less than stellar score.

Here are the five things that impact your score the most

#1. Pay on time, every time. This means at least your minimum payment.  For younger folks, they’ll write me saying some months they’ll double up their payments so they don’t have to worry about it next month.  Sounds like a plan.  And, you should always try to pay more than the minimum.  However, regardless if you’ve paid more last month or not, your minimum payment is due each and every month.  Being even one day late will ding your score negatively.

#2. Make sure your payment clears in time.  If your credit card isn’t with your regular bank, you need to give at least three business days to make sure your payment makes it in time.  For example, if you bank with RBC and have an RBC Visa, when your payment is due, you can just flip the payment amount over online the same day.  But if you bank with RBC and have a CIBC Visa and bank online, you’ll have to give the process at least 3 business days for the payment to go through in time.

#3.  Don’t use too much of your available credit.  For example, if you have a $5,000 credit limit on your card, you never want to be over 50% - and ideally, under 25%.  So, no more than a $2,500 balance.

#4.  Too much credit isn’t good.  The fourth surprising one is having too many credit cards or lines of credit open.  Because your credit report doesn’t reflect your net worth or income, too much credit, even if you have zero balances on them, can reduce your score.

#5. Limit your credit requests.  Lastly, applying for too many things in a short time period can be a red flag that you’re in trouble and seeking credit, and can hurt your score.  For example, your adult child moves out, applies for a credit card, a new cell phone and boom, by the third application for a laptop lease, they get declined.  Space out applications when possible.

Your credit score can cost or save you tens or hundreds of thousands of dollars over your lifetime from the rate you can negotiate on your mortgage to your finance payment on your next car loan or lease and so much more.  See a pro like a Certified Financial Planner for help and find more info at www.FinancialPlanningForCanadians.ca.  If you’re in financial trouble, reach out to a non-profit credit counselor.

Learn more tips for getting your finances under control with my recent interview on Global News Saskatoon

Looking for ways to up your credit score even more?  Check out my article with Meridian Credit.