What are the golden rules of credit?

Regardless of your current credit situation, following these rules will help you build and maintain a strong credit standing:

  • Make all your payments on time. Regardless of the type of debt, it is essential that you make all your payments on time. Making timely payments will help you establish a positive payment history on your credit file and prove to banks and lenders that you can handle credit. Missing payments will do the opposite. If you are falling behind on your payments try calling the lender to see if you can come to an arrangement to prevent further damage to your credit.
  • Don't use too much of your revolving credit. Revolving credit are things like credit cards and lines of credit. If you have either or both of these products it is recommended that you don’t use more than 30% of the credit limit. For example: if you have one credit card with a $1,000 limit try and keep the balance at $300 or less.
  • Don't apply for credit too often. When you apply for credit a lender will do an inquiry on your credit file. This inquiry will slightly lower your credit score and appear on your credit file for all other lenders to see that you are looking for credit. Applying for credit too frequently will hurt your score significantly and show lenders that you are frequently trying to find new credit. It is best to wait until you are certain you will be approved to apply for credit. You can do this by monitoring your credit with a one of the major credit bureaus or by using the credit monitoring tool that is optional with every Spring Financial loan.
  • Have a mix of active, positive trade lines on your credit file. In order to build and maintain credit you will need to have some active loans and credit cards. Each time you take out a new loan or credit card a new trade line is added to your credit file and each trade line will report your payment history. Banks and lenders like to see both revolving credit (credit cards or lines of credit), and installment credit (personal loans or auto loans) on a potential borrowers file. Making timely payments on multiple types of credit will prove to banks and lenders that you are capable of taking on these financial responsibilities in the future.
Equifax and TransUnion are the two main credit bureaus is Canada. For more information on how credit and your credit score works please visit their websites: https://www.equifax.com/personal/education https://www.transunion.ca/build-credit

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