Are you new to the realm of borrowing and lending? Are you trying to recover from debt in the past? Are you trying to make your way to Canada for the first time? Improving your credit may seem intimidating, but there are several ways to approach it.

Why should you build your credit?

Lenders look through your credit reports and credit scores whenever you apply for financial products such as credit cards and loans. Evaluating your credit history helps them determine how risky an investment you are and whether you are worth the risk. 



Types of credit cards

Various credit products can help you build credit over time, such as:

• Secured credit cards

Secured credit cards work more or less the same as a conventional credit card. However, typically, in this case, you need to make an advance deposit before getting approval and access to the credit account. The amount you put down upfront determines your credit limit.

• Retail credit cards

Retail credit cards are another option. This type of credit card, just like secured cards, functions much like a traditional credit card. The only exception is that your prefered retailer offers it. Retail credit cards often come with instant approvals, following which you can immediately start shopping, earning rewards, and building your credit. They can be a valuable option for individuals with low scores or limited credit history.

Points to consider

Bear in mind the following points before applying for either of the credit card types mentioned above:

·       Usage Limitations: Using a retail credit card restricts you to shopping at the retailer that issued it;

·       Interest rates: Compare interest rates to ensure you get the best deal. Talk to a financial expert or mortgage agent to understand how to do this effectively;

·       Recurring Fees: Read the fine print and check for regular and frequent charges so that you know exactly how much the card will cost you;

·       Perks and Benefits: Some credit card companies offer incentives and loyalty programmes. Compare them for each company and see which fits you best. On the other hand, credit cards can also help develop your credit score.

How to build credit responsibly

Effectively and responsibly building credit requires some planning. Here we outlined some tips on how to achieve this:

·       Late payments result in interest charges and extra fees by default. Still, it can also harm your reputation and credit health. So make sure you pay up in full and on time. Consider setting up due to date  reminders or automatic payments;

·       If you can’t clear your debt in full, at least ensure you make the minimum payment and on time. There is no escaping it, so might as well not try;

·       However, don’t let minimum payments become a habit. Regularly carrying a balance on your credit card means you’re paying more interest than needed;

·       In the case of a car loan or mortgage for which you can’t make payments in full, get in touch with your lender or mortgage broker to figure out an alternative arrangement. Depending on the lender’s discretion, of course;

·       Consider diversifying your credit portfolio in the early stages of credit score building. Focusing on a single source can slow down the process significantly. Mix it up with credit types such as a car loan, a student loan or house mortgage;

In conclusion, remember, borrow responsibly, pay on time, pay in full and avoid making a habit of the minimum payment due.

Contact me if you have any further questions to discuss.

Rodney Schunker | Mortgage Broker (Lic. M12000165)

Cell: 416-697-6423 | Toll Free: 1-855-787-7723

Fax: 1-855-787-7723 | Web: www.kingdommortgages.ca

Mail: 10 George St North, Suite 202, Brampton L6X 1R2

Email: schunkerr@gmail.com

Rock Capital Investments Inc. Brokerage #10556. Each office is independently owned and operated. Proud member of Mortgage Centre Canada.