All The Tea Surrounding The Credit History | #3 Will Shock You!

Do you wish to have a good credit score in Canada?

Are you planning to budget and trying finance tips to save for your new home?

Do you want to get good premium rates for your mortgage?

If you answered yes to any of the above questions, you must know a good credit history is a key to fulfilling your dreams.

So, you can’t really mess up your credit history unless you want to ruin your chances of living a better financial life. :)

However, there’s so much confusion and mystery revolving around the ‘credit history’ topic, and honestly, there’s so much to unveil, like:

• What is considered a good credit history? How do you get it?
• Why is it important? And, why do you need to know what your credit history tells you?
• Aren’t credit history and credit report the same? Aren’t they?

Continue to read and find all of your answers in this one guide!

1. What Do You Mean By Consumer Credit History?

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We’ll get to details in a bit, but first things first, regardless of good or bad, what exactly is a credit history? 

Credit history is equivalent to the consumer credibility record - Wikipedia

This trustworthiness shows the ability of a user to:

• Repay debt payments timely
• Maintain a good Equifax credit score
• Responsibly transform bad history into a good history

So, how is it different from your credit report when they both typically show your creditworthiness? Let us explain!

Credit History Vs. Credit Report Vs. Credit Score

One can’t talk about one without mentioning the other in the credit world. So, let us break down the basic meaning of every term to understand the concept deeply:

Bonus: Click to find a study by Julia Kagan and understand what’s the negative information on your report.

2. What Is A Good & Bad Credit History?

Even the names defined themselves; a good history is supposed to be positive, while a bad history would be anything full of negatives.

So, if you apply the literal definition to history, good credit history is a record free of all the negative information. While the bad history is the consumer record that can’t help you improve credit score or financial condition.

So, here’s how good credit history Vs. Bad credit history looks like:

1.    Record of late or missed payment

Late, missed, and overdue payments are usually considered the ‘negative information’ on your account.

• For instance, your due date was 7, but you cleared the payment on 11. Now that’s a late payment and will be recorded as bad credit history.
• Or, if you missed an entire payment, it will be taken as an overdue or missed payment, which will further show in your credit history as bad information.

Whereas, a good credit history would be free of any late, missed, or overdue payment record.

2. Consumer Debt

Usually, a spending amount until the monthly bill has been paid can be taken as consumer debt. The purchasing can be of a food item or even household compliance.

• When the amount spent hasn’t been cleared, it will be shown as a positive balance on your credit account or credit history.
• So, if you fail to clear the bill at every month's end, the number will only increase, thus contributing to your bad credit history.

In comparison, a good credit history clearly shows the responsible nature of consumers in repaying the debt every month.

3. Maintenance of outstanding balance

A responsible consumer will maintain the account's outstanding balance to balance a good credit history.

While in contrast, a bad credit history owner will have a high outstanding balance, thus increasing the credit utilization ratio.

And, folks, even the credit noobs know this, a high credit utilization ratio will take your good credit history down the drill! :p

Well, talking about the good and bad credit history, can there be anyone who has no credit history?

3. Can You Survive With No Credit History?

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According to Review Lution research, Canada's credit card circulation reached 76.2 million in 2021. And, the number will only increase in the coming years.

• By 2025, 76.2 million is likely to touch 82.7 figures in Canada alone
• Moreover, based on the study, an average Canadian at least uses two credit cards
• An average 83% of the USA population at least use one credit card

So, with such a thriving figure, can you imagine anyone who can survive without having a credit history?

Hypothetically speaking, yes, one can survive entirely on cash payments and plastic money.

But, based on facts, it seems like not many people believed in such a theory. Because honestly, there’s so much you can earn from making online or in-person credit transactions.

However, it is also true not everyone can have a perfect credit history from the start.

And, when so many people struggle with the outstanding balance and making ends meet, it’s only become impossible to cope with financial pressure. So, to help you out, we have listed some helpful tips to build credit in Canada.

Here you go:

4.   How To Build Good Credit History In Canada?

Building a good credit history is important for affordable insurance and mortgage rates. Moreover, it can also help you maintain a healthy yet enjoyable spending lifestyle.

Pros of Good Credit History

Bad credit can take everything from you, but a good credit history can help you earn anything you want. So, let’s read some benefits of good credit history to understand its importance:

• Your good credit history can help you land a mortgage or insurance loan at cheap rates
• It can make you qualify for a beneficial credit limit increase
• It can help you get an affordable rental place
• You can apply for a low-interest auto loan
• You can save good money to buy your home or pay student loan
• It can help you get a phone or other necessities without having to pay any high-security deposit or fee

Of course, these are just a few we have mentioned. Now, let’s read how you can build a good credit history to benefit from all the perks:

• Never forget a payment: Even a single late, missed, or overdue payment is recorded in your credit history. So, to maintain a good financial summary, it is advisable to follow a timely payment schedule.
• Avoid multiple cards: If you struggle to clear your monthly bill or live from paycheck to paycheck, try to use one or two credit cards. As multiple cards might make it hard for you to maintain.
• Skip cash advances: It can be a good idea in case of an emergency but adopting it as a new financial habit will do you more harm than good. A cash advance will only increase your interest charge, thus putting you at debt risk.
• Consider a secured credit card: If you’re an adult or a student who has a bad or no credit history, consider getting a secured credit card to rebuild your history and score slowly yet consistently.
• Maintain your credit utilization ratio: An average outstanding balance (subtracting current balance from credit limit) can help you reduce your credit utilization ratio. And, abusing the spending privilege will only make you overspend and thus increase your outstanding balance.
• Become an authorized user: Ask a good credit history relative or friend to let you be an authorized user on their account. It will help you get an advantage from their good history.

However, consider taking advice from a credit expert or your credit card company to discuss all the pros and cons of doing that.

Lastly, maintaining a good credit history is not a matter of days. In fact, some credit mistakes can show up to 7 years on your report.

Yet, it’s never too late to start, so take the initiative now to right the wrong!

Bottom Line

Your every financial judgment will affect your credit score and credit history. And, further, can have a good or bad impact on your financial stability.

Good financial history will help you build a strong consumer case for the lenders, while a bad credit history will ruin your chances of getting anything and everything.

So, it’s mandatory to know where you stand in your credit history, as this is the only way to do something about it.

We have discussed the perks of good credit history and the cons of bad credit history to let you decide what your credit history says about your financial condition!