When it comes to credit, many people either do not want to engage in the creditor, even if they do, end up in a debt trap or difficult situation. A survey from the Canada Life Assurance Co. showed that Canadian people in their 20s have the worst financial literacy compared to other age groups.
This study showed that financial literacy came after a person started to earn and financially made some poor judgments. According to financial experts, getting in debt at such a young age is one of the worst mistakes to misbalance their future finances.
Therefore, it is extremely essential to learn about credit and maintain a good credit history. If you want to learn about online loans in Canada and credit history, this article will deeply brief you about them.
What is credit?
A credit or a loan is the amount you currently do not own but have borrowed from someone else and promised them to return the money with or without interest.
What is a credit history?
Credit history is a record of all the credit transactions you made in the past. In Canada, having bad credit is not the problem, but having no credit is the main problem. Many people do not have enough credit history to get a loan. Most loan lenders, such as banks, offer loans after checking your credit history.
A credit report includes how many times you took credit, how many timely payments you made, how much loan you used, your past loan amount, account balances, and your payment history.
What is a credit score?
A credit score or FICO score is a three-digit number provided by Equifax or Trans Union, reflecting your creditworthiness. The score ranges between 300 to 850. These are calculated after analysing your credit history: timely payments, using a limit, not overspending will improve your credit score, whereas delays in payments, utilizing 100% of your credit will reduce your credit score.
Before learning how to have a good credit score, you need to know how to have one! Below are the steps to help you start building a credit history if you are new to Canada.
- Apply for utilities
Setting up utilities in your name can be tricky if you temporarily live with family while settling into Canada. However, when it comes to creating credit history through organizations like cell phone carriers is frequently an excellent place to start. A strong credit rating does not develop overnight, but as you create new credit accounts in your name and make regular, on-time payments; your activity is recorded to credit bureaus, which will help you when it comes time to apply for a mortgage.
- Get a secured credit card
It can be difficult to manage life in Canada without a credit card, from online shopping to making reservations and ordering supper. If your credit card application is rejected, you can apply for a secured credit card. It means that you put collateral or money equivalent to the total limit of the credit card and issue a credit on it. When you make regular payments toward your credit usage, credit bureaus are notified, and your credit score may arise.
- Pay bills and credit on time
The way you use credit is one of the elements that can affect your credit score. So it’s critical to pay all of your payments on time while building your credit history, and it’s also a good idea to pay more than the minimum payment on credit cards each month.
By following these tips, you can start building a credit history. Every institution is different and can have different policies, but on average, it takes 18 months to build a good credit history. Next, you will learn how to maintain a good credit history.
How to maintain a good credit history
- Over utilizing or using 100% of credit cards will backfire on you and result in a decrease in your credit score. Keep the utilization under 30% of your total spending limit. If you use credit card to its limit, it will signal the creditors that you may make a default in payments, thus reducing your credibility.
- Do not make defaults. Pay on time and do not delay your payments. Making faulty payments are recorded in your credit history, which may affect your overall credit score.
- By consistently using credit cards or taking loans, you will build your credit history and improve your credit score. This helps lenders build trust in your loan and help you get approved for a loan at a lower interest rate.
By following these simple tips and ideas, you can start creating credit history in Canada. If you feel you may need extra help to pay for a loan, get a loan from an online loan lender in Canada.
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