Building a good credit score will help with many of your goals
We’ve all seen the ads for apps to track your credit score so that when you need to, you can qualify for a loan, mortgage, or line of credit. But how do you build a good score in the first place?
A good credit score is going to help you throughout your life. Want to buy a new car, get into a new home, or even pick up a new phone? There will likely be a credit score check required before you can borrow the money or commit to that ongoing plan.
Building and maintaining your credit score go hand in hand. Here are six ways to do that.
1. Start slow
Good credit takes a little time to build. If you overdo it by applying for several credit cards at the same time, you can damage your credit score right from the start. Any credit check – for a credit card, cell phone data plan, rental unit, or even some job applications – will produce a “hard” credit inquiry. Too many of these can indicate you may be taking on too much debt and risk. Just apply for one manageable card.
2. Get a credit card
A credit card is one of the most useful tools for building credit – as long as you use and manage it wisely. Plus, it is practically a necessity for any online purchases or reserving things like hotel or car rentals. BlueShore offers options with no annual fee, and a special provision for mobile device insurance (loss, theft, damage). Check out our offerings or ask your financial advisor for the card that’s best best for you.
3. Keep your balances low
A credit card is not “free money” and maxing out your credit cards can hurt your credit score. But charging small items to your credit card then paying it off in full every month will help you build your credit profile in no time. Regular, but manageable, use of your cards is best. As a rule of thumb, try to use less than 35% of your available limit. For example, if your card has a $1,000 limit, you should be using no more than $350 of it each month.
4. Pay bills on time
Your payment history is one of the most important factors affecting your credit score. This isn’t just for credit cards, it applies to all bills and expenses – utilities, phone plans, rent, and more. Any late payment reported lowers your score, and defaulted bills or those sent to collections can remain on your credit report for up to seven years.
5. Set up auto payments
Whenever possible, set up pre-authorized or auto bill payments. You can always consider using your credit card to pay for utility or phone plan bills, then set the “auto pay” feature on your BlueShore Mastercard® to either “minimum payment” or “balance” – whichever you are most comfortable with.
6. Use your credit more
This might seem counterintuitive, but one of the best ways to build a strong credit score is to use your credit more often. Your score is built on your ability to use credit and pay it off responsibly, showing that you are managing your finances effectively.
You can get a free copy of your credit report once a year from either of the two largest credit bureaus in Canada, Equifax or TransUnion. Simply complete their forms, provide copies of the necessary ID (such as a driver’s license or passport), and you’ll receive your credit report through the mail. Online copies of your report are also available (at a fee).
If you have questions or would like to talk to someone about how you build a solid credit score, connect with our Solution Centre by phone, on live chat, or visit your local branch.
