Credit: Myths & Realities

Blog 3 - Credit: Myths & RealitiesYou’re almost done the school year! Congratulations! It’s around this time of year, however, that you’re likely running low on funds. But before you reach for that plastic, be sure you know just what you’re taking on by using credit – and the different types there are. Credit is great, but like anything – it comes with responsibility. Improper use can put your credit score into a stickier situation than you’d like.

Maintaining a strong credit score will help you later in life as goals change from paying for education to buying their first car, starting a business or buying  their first home. It’s our job to help people understand how using credit responsibly can help them down the line. Many students get their first credit card when they begin post-secondary education, so this is the time to educate them on responsible credit use.

Myths & Realities of Credit Scores

1.     Myth: There is no harm paying your bills late as long as it only happens occasionally. Reality: Missing even one bill payment can negatively affect your credit rating – this includes your mobile phone, internet and credit card bills.

2.     Myth: Applying for a lot of different credit cards doesn’t affect your credit score. Reality: Applying for a lot of different credit cards can hurt your credit score, so don’t apply for a card for the free swag that comes with it – it could end up costing you more in the end.

3.     Myth: In Canada, your credit rating is affected by your age, income and gender. The higher a person's income, the better that person's credit rating will be. Reality: Your credit rating is based on your record of managing your finances responsibly. Lenders look at how you handle your financial obligations, such as whether you pay your monthly bills on time, carry a balance, or regularly miss payments.

4.     Myth: Checking your own credit will harm your credit standing. Reality: Checking your own credit history does not affect your credit rating. In fact, it’s recommended that you request a report on an annual basis to check for errors.

5.     Myth: Asking for lower limit on any credit product will help your credit rating. Reality: Lenders like to see a big gap between your available limit and the amount of credit you're actually using. Apply for the credit you need and use it responsibly.  While it’s best to pay off your balance in full each month, you should always make the minimum payment.