Your credit score influences many of your financial abilities and, ultimately, the decisions available to you. Needles to say, it’s a pretty important part of your financial well-being. Yet, for most people, it remains a mystery. Here’s some tips on how to build it, and how to improve it, so you can know the score.
Your credit score is a 3 digit number that comes from the information in your credit history. It lets people know, at a glance, how well you’ve managed your money in the past. This helps lenders and others know if it would be safe or risky to lend you money, or have confidence that you will be able to pay for contracts you enter (such as renting an apartment), or what interest rate you can negotiate. So, if you want a loan, or to rent that awesome new apartment, or get a low rate mortgage, the answer that comes back to you is influenced by your credit score. It’s important to have a good credit score to give you more options in your financial life.
If you have no credit history, or an average credit history, how do you build a good credit score? The answer is to start small and then diversify. You need to show that you can responsibly pay for loans from financial institutions (paying your mom back doesn’t count, but pay her back anyway) and regular occurring services, like the services you get bills for and pay monthly. A good example of the small things you can do are: get a credit card in your own name, not a secondary card of your parents or your partner, and use it regularly for purchases that you know you can pay back at least the minimum payment (preferably the entire amount as we really want to avoid credit card debt). Another example is to have bills, like your hydro bill, in your name and pay it on time each and every month. Then, after you’ve established that credit, consider taking out a loan for a major purchase you have planned, even if you have the cash on hand. Paying this loan back will help diversify your credit and build your credit score.
If you’ve made some mistakes in the past or circumstances have led you to miss payments and not have an ideal credit history, there are steps you can take to get your credit score trending in the right direction. First, if it’s a debt issue, one great option is to consolidate your debt so that you pay only one payment that is paid automatically every month. But no matter what the reason is for your credit history difficulties, our Financial Advisors here at Kootenay Savings would be more than happy to chat with you about your situation. Beyond credit score, getting financial assistance and guidance can really make your life better and ease financial-based stress.
For more tips on how to establish a good credit history or to improve a negative credit history, check out this Financial Consumer Agency of Canada article.
The guidance you want, plus a financial friend who has your best interest at heart.
For over five decades it has been an honour to be part of our communities and we’re committed to being here for decades to come. Opening an account? Buying your first home? Saving for retirement? Choose your financial destination, and let’s make sure you take the best route.
