5 tips to maintain strong credit
Are you looking for ways to build and maintain a strong credit profile? Your credit score is important for all aspects of your finances, such as securing a mortgage, getting approved for other loans, and managing personal finances. Your credit wellness is all about your ability to manage your money effectively so you can achieve your goals. Here are some tips to help you build up your credit, and how you can maintain it moving forward!
#1 Pay off any outstanding debts
Many people have debt, but this doesn’t necessarily mean you cannot also have a strong credit profile. The key here is to have a good handle on your debt and have a solid plan to pay it off. About one third of your credit score is determined by how efficiently you manage your payments, which includes paying off your debts. This means debt management makes up a huge chunk of your credit profile! Late or missed payments can have a big impact on your credit score, so making timely and consistent payments is essential to building up your credit. It’s important to make at least the minimum payment on all of your debts each month, and not neglect any of your debts in favour of others. As long as you keep up with the minimum amounts, your credit score will remain steady and allow you to build upon it. We recommend setting up auto transfers if you have a habit of forgetting to make your payments, which will help reduce the chances of encountering late payment fees.
#2 Steer clear of adding on new debt
One of the most important parts of building up your credit score is turning down the chance to add onto your existing debt load. With the holidays approaching, it is very easy to take on new credit cards or lines of credit, and there is no shortage of opportunities to do so. However, if you are already working to clear out debt, it is best to avoid stacking on more debt for the time being. The more debt you have, the higher your monthly payments will be, and the greater the risk of experiencing late or missed payments. As we already mentioned, these can have a harsh impact on your credit score. Try to hold off on major expenses that require loans for the time being!
#3 Track yourself with an app
Thanks to a huge variety of budgeting and financial apps, it has become increasingly easy to hold yourself accountable and track your finances. While every app has a slightly different style or approach, the objective of all of them is to help users better manage their money and reach their goals. Many apps allow you to connect to your bank account to track your spending and get real-time information on your financial situation. You can also pay bills, assign target spending goals, create digital “envelopes” dedicated to certain expenses, and much more. Some of the most popular apps include Mint, You Need a Budget, and Goodbudget. Apps have become increasingly intuitive and easy to use, giving everyone the chance to manage their finances most effectively.
#4 Focus on credit utilization ratios
Your credit utilization ratio represents the amount of credit you use compared to the total amount of credit you have available. For example, if your monthly credit limit is $10,000 and you usually spend around $3000, you have a credit utilization ratio of 30 per cent. This factor is important to your credit score because the higher your utilization, the less available credit you have. This signals to lenders that you may not be able to take on additional debts or loans, which can impact applications for mortgage financing, for example. It is best to try to keep your utilization ratio below 40 per cent. This amount of usage allows you to build a credit profile with proven payment history, but it still shows lenders you are on top of your payments and are a responsible borrower.
#5 Enlist the help of a mortgage broker
If homeownership is on your mind, you should be sure to work with a mortgage broker as you work to improve your credit profile. Brokers can help ensure you have a strong credit score and can offer guidance as you strive to improve it before applying for a mortgage. Plus, your broker has access to the best lenders and mortgage products for your needs and your situation. This means you can feel confident that you have a professional on your side who can pair you with your best match. If you are feeling stuck or unsure on how to improve your credit, your broker can also assist you by breaking down your current situation and offering advice.
Maintaining strong credit is not always easy, and it is a process that requires dedication and attention. However, it is an important part of your financial well-being and plays a huge role in your ability to access the best mortgage products. These steps will help you improve your credit and open doors for better opportunities and strong financial well-being. If homeownership is part of your plans, make sure to reach out to a mortgage broker! We can help you get started and put you on the right path.
If you have any questions about your mortgage, get in touch with me!