Part of managing your finances is building good credit. Having good credit opens the door to being able to get loans, credit cards and ultimately a mortgage. However, we may get into situations that cause our credit to go from good to bad. This Hamilton mortgage broker shared that anyone can change their credit from bad to good. The trick is understanding your credit report so that you know where changes are needed.
Your credit history begins the first time you apply for a loan, credit card, finance a purchase, or apply for a line of credit. This establishes your credit history and allows you to start building your credit standing.
Your credit report is a record of your borrowing history that lenders, such as a Hamilton mortgage broker, will look at when determining if they will give you a line of credit. It shows details, such as whether you make your payments on time and how many lines of credit you currently have. There are 5 main factors that can affect your credit.
Your credit report will show how often you make your payments on time and for the agreed upon amounts. For a healthier credit report, it’s important to ensure all payments are made on time.
Credit Utilization is the ratio between how much credit you are using in comparison to what credit is available to you. The recommended credit utilization is below 50%. An example would be having a credit card with a $ 1,000 limit but only having $500 or lower balance on the card.
Credit History Length
Your credit history length will date back to that very first loan, line of credit, or credit card that you were accepted for. The longer your credit history is, the better the score on your credit report.
Every time you apply for a new loan, credit card, or line of credit, the lender will issue a credit inquiry. Having too many credit inquiries can impact your credit score negatively.
The credit mix refers to the types of credit accounts you have on your credit report, such as car loans, credit cards, or student loans.
Ways to Improve Your Credit Score
Pay on Time!
It’s important to make your payments on time. A missed payment can have a significant impact on your credit score, however, can be rectified over the course of a few months. If you miss more than one payment and you had better have a good reason and it will take that much longer to rebuild your credit score. A good way to stay on top of your payments is to make sure that the loan or mortgage payment is something you can realistically afford. If you find that you are struggling, contact your Hamilton mortgage broker for advice.
Never charge more to your credit card than you can realistically afford to pay back. Rather than maxing out your credit card all the time, only use 50% of the credit limit.
Set up automatic monthly payments for your credit card or loan account. This will eliminate the problem of missed payments should you forget.
Sign up for one of the many credit monitoring through Equifax. This will help you keep track of what is happening with your credit history. It also motivates you to make your credit score better and will alert you to any fraudulent activity that could make you the victim of identity theft.