Take control of your Credit Score
…before it takes control of you!
Let’s talk credit scores for a moment. Most people don’t know much about the importance of keeping a good credit score. I heard about credit scores and credit reports when I was younger, but I honestly had no clue until I began studying to become a real estate agent. Your credit score is something you have, or don’t have, whether you like it or not. It’s best to understand it as it can help you throughout your life and, if you ignore it, it can cause you endless problems. From being able to get a loan or a mortgage, to getting an apartment, a good credit score is critical. There are several ways you can stay on top of your credit score, I personally like having an app on my phone for quick access.
Your credit score matters whether you like it or not. When applying for things such as car loans, mortgages, and lines of credit, your credit score is critical to a successful application. If you have a low credit score, or no credit history, you won’t be approved for much…well, maybe a Canadian Tires credit card with 29% interest (interest is the rate you pay if you don’t pay the loan back on time). If your credit score is above 750, you will likely have success with getting loans and credit cards with fair interest rates. If your score is in the low 600’s or less you may still get a loan, but the interest rate will be crazy high.
Renting, Real Estate & Credit
There are two key things that matter most when renting an apartment – your employment situation and your credit report. When filling in a lease application you will be approving a credit check, this is standard. From a landlord’s perspective, it’s really hard to kick a tenant out, even if they are in default of rent payments. So, landlords are looking very hard at employment history and credit scores these days. A landlord is less likely to rent to you if your credit report shows that you constantly make late payments on bills. Bankers look at the same information when you apply for a mortgage. Even if you have your down payment saved up, a low credit score will impact your ability to get a mortgage. You may get a mortgage, but with a lower score you may be required to get a guarantor and you will definitely end up paying a higher interest rate because in the bank’s eyes you represent a higher risk.
Identity Theft and Jobs
Other reasons to monitor your credit score are for security purposes and job applications. With cyber-crimes and hacking on the rise, the best way to find out if someone’s got your personal information is if you see a sudden move in your credit score. It can alert you to problems before your credit score gets wrecked.
When applying for a new job, a lot of employers will run background checks on you as part of their process. If they see a bad credit history they may pick someone else over you…best to cover all the bases.
How to Build Credit
I was offered a credit card in the mall once when I was 19, the only reason I took it was because I got 5 free movies if I signed up. My limit was $750 and I used it maybe 2 times while I was in university. The thought of even having a credit card scared me because I didn’t trust myself! What I didn’t know was that I had accidentally started to build my credit score. Turns out, having a credit card, using it, and repaying it on time is actually a really important way to start building your credit rating. Who knew!
Credit – the Basics
So, if you don’t have a credit card and want to start building a credit score – get a credit card and use it wisely. For most people, having a credit score is better than not having one.
Your credit score is a 3-digit number that ranges from 300-900. A score over 680 is considered good, and ideally you want be above 750. The average Canadian has a score of about 700. Your score changes based on several factors such as how often you pay off your debts, whether you pay your bills on time, the number of credit cards or loans you have, and whether your credit cards are maxed out.
Basic Rules of Thumb
The basic rules of thumb to use to keep a good credit score are:
– Pay your bills on time
– Pay more than the minimum on your credit card – try to pay it in full
– Don’t max out your credit card unless paying off right away
– Try to not use more than 35% of the total credit available to you at any given time
Check out these Apps!
I checked out a couple of apps, Credit Karma and Mogo. Credit Karma is more focused on credit and credit education, unfortunately it doesn’t have an android app yet. Mogo is more functional and offers the ability to apply for small loans, buy Bitcoin and they provide both an iOS and Android app versions. Mogo is Canadian, if that makes a difference to you. Both apps are good – it just comes down to your personal preference. Download them and play around for a while – you’ll get hooked!
My suggestion is to make it a monthly habit to check out how you’re doing. In no time, you’ll become a credit guru, making your life a lot simpler as you do.