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Credit Score and Credit Worthiness

    Credit scores are three-digit numbers that essentially explain your credit-worthiness. A credit score ranges from 300-850. Having a line of credit on a credit card can make or break your credit score depending on how you use it. When you have a good credit score it means that better options are available to you. Having a bad credit score or no credit score means that you have fewer choices when it comes to what interest rates you will quality for or what loans you may be able to get.

    You can find out your credit score available below.

    It is a good idea for you to review your credit reports, but don’t just glance over it. Inspect your report thoroughly and make sure there are no errors. Errors certainly do happen—in fact they happen quite frequently–and if you catch them you can clear them up, thus improving your credit score.

    If you already have a credit card, keep using it. Keep your credit utilization rate low, but make sure that it is existent. Using your cards helps you build credit. Not only that, but many cards have rewards and other nice benefits to using them. As long as you are responsible using your credit card is one of the easiest ways to build credit on a routine basis.

    If you want a good credit score pay your bills on time. Paying your bills late can wreak havoc on your credit score. This is a big problem for some people who have a hectic life and just lose track of what needs to be done. The biggest answer to this problem is utilizing automatic payments. You may also want to get organized and make reminders on your email or phone so that you don’t forget those important bills.

    Many people use their credit cards regularly and stay out of debt.

    To do this, they only charge to their credit cards what they can afford to repay in the following months bill. They pay their balance in full and do not use it for revolving debt. To do this you have to understand your cash flows and track your charges.

    Short Term Vs Long Term Loans

    Making purchases with your credit card is a good idea if the time you take to repay them is short. If you want to make a purchase for $1,000 but don’t have the cash ready at hand, you can use your credit card for it. If you take an interest rate of 18% and pay it off in a short period of say 4 months then you would have paid an extra fees under $50. If instead of 4 months you stretch it out over 2 to 3 years, then you will pay close to $300 to $400 in fees.

    Repaying Can Become Hard

    Sinking into a mountain of debt is really easy. People tend to sink in gradually as they initially start out with a lower credit card limit. The credit card limit rises over time and it makes over charging it tempting. People then suddenly end up with a mountain of debt, making paying down debt very difficult. The payments increases every month because the interest compounds.

    When this becomes the case, speaking to a credit counselor may be helpful.  A toll free number to a Canadian credit counseling service is 1 (866) 971-4146.

    Credit Card Debt Affects Credit Score

    Holding on to high balances will impact your credit score in a negative way. To ensure that your debt does not affect your credit score, you have to ensure that the debt does not exceed 35% of your credit limit. So if you have $1000 credit limit, then your debt should not be more than $350.

    Paying on time is also very important. If you fall behind by a cycle then your lender will report delinquency of 30 day to all the major bureaus. If you start to miss more, then your credit score may take a more severe hit.


    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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