How do credit cards affect your credit score?

Credit score is something of which everyone seems to be aware, but not many people actually know how a credit score is comprised.  Credit score is a numerical evaluation of one’s credit history which determines their likelihood of replaying financial obligations.  In Canada, credit scores can vary from 300-900.  If your credit score is between 800-900, then you are in excellent shape and will be more likely to be granted a loan.

Now that we know what a credit score is, what exactly makes up our credit score?  Good question, let’s go through it…

1. Applying for a new credit card – This shows credit institutions that you need credit, whether you end up using the card or not.
2. Any time a financial institution views your credit score – This can only be done with your permission, so no need to worry.  In cases like applying for a mortgage, financing a car, a loan, and yes, applying for a new credit card, financial institutions will need to access your credit report.
3. Missed or late credit card payments – The due date is listed on your statement for a reason!  Don’t neglect this date, or else your credit score could suffer.
4. Too many or too little credit cards – Too many is definitely bad, as financial institutions can see that you need credit.  Too few is also a problem, as you don’t get a chance to build your credit score by making regular payments on time.
5. High credit balances – Having a “high” credit balance varies from person to person, and it’s all relative to your credit card limit.  Avoid getting close to your spending limit, and definitely don’t max out any of your cards.

Maintaining a credit score is practically essential in today’s world, which is why it’s important to be very careful when apply for credit.  If you find that you’re having a difficult time keeping up with your credit card payments, give DebtHelpers.ca a call at  1-855-873-6222.