Ah, credit… It will either haunt you or make your dreams come true. Or perhaps you’re just looking for some consistency in life? Regardless, this post can help you out and answer for you the question of “how do I establish and maintain my credit?”
It’s true that your credit rating in Canada is a reflection of your credibility with financial lenders, and can affect your ability to get approved for credit through them. If you’re thinking about financing a vehicle, or even one day a house, then you’re likely thinking a lot about your credit. In fact, one of the absolute best ways to build or even rebuild your credit is to finance a vehicle.
But there are other ways too. Let’s talk a bit about all the options here, so that when you decide to go to a lender like Go Auto Outlet for a consultation, you’ve already answered the question of “how do I establish and maintain my credit in Alberta?”
The Steps to ESTABLISHING Your Credit
Check Your Credit Score
If you haven’t already, let’s check out your credit score. Your bank or credit union can do this for you, or the Finance Experts at Go Finance can! It’s easy to pull this information, and it will give you an indication of how you’ve been doing and how much you can improve. This is the first step, right here.
Make Your Payments on Time
Yes, credit card bills. We all get them, and none of us want to pay them off. But we have to, and we all know that the sooner we do, the better. And sometimes we take for granted that late payments or missing a payment can impact our credit, often immediately. In fact, over one third of your FICO score–which is used by most lenders–reflects on-time payments.
The simple solution here is also one that will offer you peace of mind: set your bills to auto-withdrawal. At the very least, set up auto payments for the minimum amount due so that’s always paid. You won’t have to worry so much about your bills being paid, and you’ll never have to worry about late or missed payments!
Lower Your Debt, Raise Your Available Credit
Another one of the key factors in your credit score is the amount of credit you use compared to how much you have available. If you have a good chunk of available credit, lenders will be much more inclined to offer you a loan. But if you’ve maxed out your credit cards, then lenders might be wary. This isn’t to say they won’t work with you–many lenders are happy to work with you regardless of your credit–but it does mean you’ll be forced to borrow money at a higher interest rate.
So clear up that dept before you ask for more credit! Your bank is a great place to start with that.
Note that closing a credit card account won’t help anything at all. Even if you never really use a credit card, closing the account can impact your credit score because it will reduce the amount of credit you could potentially borrow and increase your overall credit utilization ratio.
How Can I Improve My Credit Rating Through Loans?
This is one of the best ways of building up or rebuilding your credit. For example, student loans in Canada are excellent because of the low interest rates and the amount of time you’ll have available to pay them off. Here’s how paying off a loan can help with your credit rating in Canada:
- Borrowing money in the first place communicates to lenders that you’re willing to take on the responsibility of paying off a loan with interest and on time, which lends to your credibility with them.
- As you make your regular payments toward the cost of the loan on time, you really start to earn cred with these lenders. What you’re doing here is building trust, really. They absolutely do pay attention to when and how you make your payments, and they keep track of the results.
- As you get closer and closer to paying off the cost of your loan with them, lenders get closer and closer to becoming satisfied with the results of the arrangement. And at it’s end, you’ve successfully earned the lender’s trust. This trust opens up endless possibilities for you.
Congratulations! You’ve paid off your loan and, better yet, built a relationship with a lending institution. Now they’re much more inclined to offer you credit for other endeavors, like financing a home–a mortgage!
Auto Loans are No Different
The process above applies to any kind of loan, including auto loans in the Edmonton and Red Deer areas. Your monthly car payments build credibility with lenders, which builds your credit rating! And one day soon after, you’ve got a high credit score and endless financial possibilities.
We hope we’ve answered the question about ‘how do I establish and maintain my credit?’ Have any questions for us about this topic? You’re more than welcome to contact the Go Finance team of experts to learn more!