But there are some costly bad habits you may not be aware of that can negatively impact your credit score -- a three-digit number that lenders and insurers use to gauge your credit behaviour to determine if you're a good candidate for a mortgage or other credit. Read the 5 Minute Guide to Your Credit Report and Credit Score to find our more about your score.
If you're looking to buy a home, purchase a vehicle, or qualify for a loan then it pays to avoid these five bad habits.
Are you close to your credit card limit? Spending up to the max may seem like an OK idea -- you were given this much credit after all -- but the closer you are to your limit the more likely it is that credit reporting agencies will see you as a risk of going over the top. If the total amount you owe on all your credit cards and loans is over 80% of your total available credit, then your credit score could take a hit. To avoid this drop, try to stay well below half of your available credit limit.
2. Paying bills late, or skipping payments.
Missing a bill payment by just a few days can take a chunk out of your credit score -- so think again before paying your credit card late or not at all. Credit reporting agencies get constant updates from your creditors, and a single late or skipped payment could deflate your score for up to six years.
3. Applying for too much credit.
Signing up for a department store credit card to get a deep discount or a grab a free gift may seem like a great idea, but applying for a lot of credit in a short time can kill your credit score. Every time you apply for credit a hard query is made to your credit report by the lender to see if you're a good credit candidate. Too many hard queries from credit card requests, car loans, or even mortgage applications can leave you with a lower score. If you need credit, avoid sending in a slew of applications by doing your research and picking the best lender from the start.
4. Closing an old account.
Do you have an unused credit card taking up space in your wallet? It may seem smart to declutter your finances and cancel that old piece of plastic, but think again. Unused credit is seen as a credit score booster by credit reporting agencies, and reducing the amount of money you can borrow relative to your debt can lower your score. If you're in the market for a mortgage and need the highest score possible to get the best interest rate, it may make sense to keep that old card for a while longer.
5. Ignoring your credit report.
When was the last time you requested your credit report and score? If you're not checking your credit files at least once a year, your score could suffer if there's inaccurate information on file. Requesting your credit report from agencies Equifax (www.equifax.ca) and TransUnion (www.transunion.ca) costs around $25 online but is free by mail -- so it makes sense to check your report annually to protect yourself from reporting errors.
Kerry K. Taylor writes at Squawkfox.com, a blog where personal finance is fun. Kerry is the author of 397 Ways To Save Money: Spend Smarter & Live Well on Less.
Your Turn: Have you been surprised by your credit score?
couple of new points ty
Chris
Posted by: Chris | 07/08/2010 at 12:46 AM
May I ask as to how to request by mail the credit score? There is never any mention of doing snail mail.
Posted by: Bob L. | 07/08/2010 at 01:35 AM
You may wish to re-think number 5. Where it may be important to check on your credit score sometimes, I am of the understanding that every time your credit score is checked it has a negative impact on the score itself so if you are checking your own score frequently you are actually hurting your own credit score
Posted by: Stewart | 07/08/2010 at 02:07 AM
for snail mail reports, go to the websites above and look for the printable form, simply fill it out, and mail along with copies of 2 I.D.s
As for checking your credit hurts your score, this is not true if you are checking your own, BUT if you go to 10 different car dealerships looking for a car loan, it does look bad, and can cause you to lose points.
Also having a wad of credit cards is never a good idea, 1 or 2 is reasonable.
I work in credit finance.
Posted by: madge | 07/08/2010 at 02:54 AM
Stewart, checking your own credit score does not impact your credit rating. Visit Equafax or Trans Union website and it is explained there that checking your own score is not considered a "hard query". Plus frequent checks of your credit score gives you the opportunity to correct errors. For example, if you move and you haven't checked your score lately and the Credit agencies have not received your new address, you must write to them and have it changed ..or else that Credit application you submitted will be denied and that will impact your score. Hope that helps.
Posted by: Carley | 07/08/2010 at 05:52 AM
Did anyone actually read #5 before posting?
It clearly states that you should check your credit rating at least once a year in order to check for damaging inaccuracies.
Posted by: zyllah | 07/08/2010 at 07:49 AM
I was informed differently as to unused credit cards. When applying for a mortgage on a single income the more credit cards I had the less I could qualify for. Even though there is nothing on that card it is seen as potential spending money and decreases the amount of mortgage you qualify for. This was the
way it was explained to me.
Posted by: Debra | 07/08/2010 at 06:14 PM
Credit scores are for people that can't handle money properly. If you don't have a credit card you will never have this problem, HELLO????
Posted by: . | 07/21/2010 at 10:55 AM
If you don't have a credit card (or some form of loan or credit account), you won't have a credit score at all, making it all that much harder when you get to a situation where your credit score is important and you can't get around it by paying cash (ie. when you need a mortgage).
And Debra, whoever gave you that information has probably not dealt in finance in a long while. It used to be that way, but has since changed.
Posted by: MrsMat | 07/21/2010 at 01:55 PM
Any one can give Tips... Why do you provide credit Card if you dont trust the Customer. If the Bank think the customer is Potential Risk Customer why we need a Credit Card in First case... post some useful tips rather than suggesting some sutpid advice.
Posted by: Shankey | 07/21/2010 at 03:50 PM
Transunion & Equifax are given too much sway on your credit report/score. You have to jump through hoops to fix THEIR errors; afterall they don't make mistakes!
Posted by: CB | 07/21/2010 at 05:55 PM
I think CB make a good point on the credit bureaus...they have the upper hand for sure. The government needs to regulate these agencies. To get inaccuracies corrected on your credit report is not as easy to have done...my boyfriend filed bankruptcy over 8 years ago and some of the creditors are still showing up on his credit report with unpaid balances...we've been trying to get it resolved but a ton of red tape to go through. They don't take phone calls and they don't respond to mail too fast...still waiting.
Posted by: waiting patiently | 07/21/2010 at 06:07 PM
Credit bureaus are regulated by the government. Contact your provincial government to file a complaint.
Posted by: babs | 07/21/2010 at 08:43 PM
Madge - going to 10 different car dealers to apply for loans is a bit excessive, but it doesn't affect your score. When there are multiple related queries that are close together, the scoring algorithms are smart enough to treat them as one. So, for another example, shopping around for a good mortgage rate won't affect your score because you've applied at 3 different banks looking for better rates.
Posted by: Kevin | 07/21/2010 at 11:00 PM
credit can be ruined by some communications companies like TELUS or Bell.I was with TELUS cell phone.After moving in April 2009,TELUS had a work order on my non working phone.Somehow Rogers fouled up my internet,cut off my landline too soon.A call from TELUS June or July still trying to fix my cell.Of course all thoe trying to conact me including TELUS ran my bills up.I refused to pay.Sent a letter to CRTC and the media.Bell not much better wanted 30 day notice to quit,Could not fix my internet problems.Between phone call and letters to return and harrassment by both companies.KP 22 July 2010
Posted by: K Powell | 07/22/2010 at 03:57 AM
Avoid credit cards if possible....
Posted by: Mitmack | 07/22/2010 at 07:33 PM
EVERYONE TAKE NOTE...The problem with your credit report comes from not being informed. I recently got a call form a collection agency, requesting that I pay the unpaid balance of an account that was taken to court and found to be invalid. I informed the agency to remove this from my report and was informed that they could do whateer they wanted as would only take directions from their client. I informed them of the courts decision and still nothing. I contacted Equaifax's privacy officer and informed them that under the Credit Report Act, of which they were in breech of, could result in a 100,000 judgement against them for misrepresentation. I was contacted by phone from a resolutions officer and explained the situation as well as sesnding the court doucments, the took immeditate action against the agency and removed this claim within 2 hours. Bottom line, if you make your payments on time, keep supprting documents (as in my case the court documents) and qouting the act. They fix the errors when reported on the spot. Remember, you are your own agency when it comes to your report.
Posted by: JAY | 07/22/2010 at 07:36 PM
Whenever the matter is of the money never give a chance to any mistake from your side or the chance to the opposition site to do it.if you doing the transaction daily verify it twice as well as check your monthly ans yearly reports. Have the alerts on your mobile and email whenever the any transaction has been done on your account.
Posted by: Heathrow city | 09/09/2010 at 06:05 AM
As for ignoring the credit score, I have a client wanting to sell their home and they were given a reverse mortgage last year. Now we find out that there is a lien on the house that we can't get answers for. So how does the bank still give my clients a mortgage?
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