Keeping an Eye on Your Credit
If you feel the weight of your debt and are having difficulty keeping your head above water, this blog might not apply to you and could cause you anxiety. Consider consolidating your debt, a zero percent interest transfer, or redoing your mortgage depending on your current rates and renewal date. Also, please contact us if you feel this stress; we can help.
Keeping your credit in good standing is key. The following are some ways to keep an eye on your credit and ensure everything is as good as possible.
Credit score
Your credit score and managing credit are huge factors when qualifying for and renewing your mortgage. Here are a few things you can do to improve your credit score.
Keep reasonable balances on revolving credit.
If you use more credit than you pay off, it can make you appear less creditworthy. We recommend keeping all your balances under 50% of your available limit. Paying your credit cards monthly and maintaining a zero balance will improve your score.
Make all your payments on time.
Good credit is established and maintained by making payments on time. The credit holder or lender will report any missed payments to the credit reporting agencies like Equifax and Transunion, which will cause your score to drop. The more payments you miss, the lower your score will be. If you fail to make payments for over 120 days, the outstanding debt will most likely be sent to a collection agency. Collections will remain on your report for a long time. *Note credit card companies and lenders only report late payments after 30 days of not receiving the payment. If you have missed a payment, ensure to pay it promptly.
Use your credit cards, and pay them off right away
If you have acquired credit cards to help build your score, you want to ensure you use them at least once every three months. Many people find success in having a pre-authorized payment set to come off the card and paying the balance each month.
Check your credit report regularly and report mistakes.
Mistakes can occur when lenders and credit companies report incorrect information. Often closed accounts must be reported as paid and closed, people with similar names can have merged reports, and we have seen many clients with multiple credit reports. You may have even become a victim of fraud or identity theft.
By checking your credit regularly, you can stay on top of everything and correct errors. Both Equifax and Transunion have programs that, for a small fee, will monitor and update you on any changes made to your report. We also recommend signing up with Borrowell, a free service that you can use to monitor your credit.
Do not apply for credit too often - too many credit inquiries in a short time could affect your score.
Don’t close unused cards - especially cards with a long reporting history.
Be aware that collections items aren’t removed from your report after you pay them - They will stay on the report for seven years but will show as paid. Ensure to handle collections immediately.
The rule of thumb is to have two trade lines of reporting - trade lines are credit cards, loans and lines of credit. Lenders like to see a minimum limit of $2500, reporting for a minimum of 2 years.
Set up a plan to manage your debt - if you are having trouble making ends meet, contact your creditors or seek help from a credit counsellor.