Welcome to Credit Tip Tuesday #2! Now that you know what your credit score is and why it’s important, we can talk about how to build your credit.
Step #1 to building your credit: Get a secured credit card and pay your bills on time.
According to Equifax, your credit score is determined by 5 different factors:
Your payment history has the biggest impact on your credit score at a whopping 35%. The easiest way to impact your payment history is to make sure that you always pay your bills on time! To do this you first need to get something that you can pay off biweekly or monthly, the most common way is to get a secured or unsecured credit card.
What’s a secured credit card?
A secured credit card is just like a “regular” credit card but it is secured by a deposit which is used as collateral (hence the name). Card providers provide these secured credit cards to their customers to help them build, rebuild or strengthen their credit profile. The card gets issued after the security deposit is received and the card limit is determined by the security amount.
How can a secured card build my credit?
Since a secured card is backed by a security deposit, most issuers offer guaranteed approval and no credit checks. Just like unsecured credit cards, secured card issuers actually share your activity with major credit bureaus like Equifax and TransUnion. So, if you have poor or no credit you will still be approved and can start building your credit. When you pay your bills on time this improves your payment history, which we saw was 35% of your credit score.
Tips to improve your payment history:
Doing these will help you improve your payment history and in turn, improve your credit score. Remember, this is a journey, you cannot pay your bill on time once and expect a huge change, however, if you continue to pay all your bills on time you will start to build your credit. Join us next week where we'll talk about the next biggest factor - credit utilization. To apply for a Plastk Secured Credit Card click here. For more information visit our website at Plastk.ca
Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.