How your credit score in Canada can positively or negatively impact your future goals.
You know the saying: money isn’t everything. But let me tell you – not having it can be.
Earning and maintaining a good credit score is important. A bad credit score can seriously affect your ability to get a loan, rent a car, or get a place when you move out. Not having a credit score can even impact your ability to pay for a phone plan in Canada. Therefore, it is important to have a good credit score for various reasons.
What is a credit score, you ask? Simply speaking, it’s a calculation that determines your ability to pay debts. Phone providers, banks, landlords, and others rely on it to determine whether or not a client/tenant will be able to keep up with their payments.
So it is essential to build a good credit score. And if you are new to Canada, it’s important to build it straight away, as it will make your life a lot easier.
Here’s everything you need to know in order to build a good credit score:
Get a Credit Card
Owning and using a credit card is the best way to build your credit score. It shows banks and institutions that you are able to pay debts that you accumulate throughout the month. Tons of banks such as BMO and CIBC offer credit cards to newcomers with zero annual fees.
Using Your Credit Card
Don’t pay off your credit card right away. Wait for the bank statement instead of paying it off the same day you make a purchase. If you pay everything off straight away, you’ll end up having $0 due at the end of the month. While that might give you peace of mind, you won’t build any credit history, which you need for a credit score.
Have the Money to Pay Off Your Credit Card
Not settling your statement affects your credit score. But that’s not all – it also accumulates interest ranging from 18-23% per month! On top of not being able to get a new phone on contract, you’re going to see a heartbreaking $50+ fee in your account.
TIP: Do not let banks fool you with a minimum payment option. Even if not paying your full due payment doesn’t affect your rating, it will accumulate interest that you’re going to have to pay to the bank later.
Pay Everything On Time
Not paying your bills can directly affect your credit score, as it shows your inability to pay off debts. Therefore, make sure that you have the money or will have the money to pay off those bills, so you can obtain a better credit score.
Buy Smart – Know Your Income and Expenses
It only takes three seconds to tap a credit card and buy that $80 sweater that goes well with your new pants. Before you make any purchases, commit to a budget and decide how much you are going to spend on what. There are different mobile apps (i.e. QuickBooks Accounting, Spending Tracker, My Budgets, etc.) that let you predict your spending allowance for different purposes based on your monthly income. I ended up saving $100+ at the end of the month once I started using these types of apps.
TIP: Remember that a credit card is not your money. It needs to be paid back.
In the end, if you’re willing to stay in Canada for more than six months, the steps above will make it easier for you to enjoy life to the fullest. Invest your time in getting a credit card when you first move to Canada. Over time, you’ll fully understand the importance of building your credit.
A giveaway celebrating new Canadians
*Opinions expressed are those of the author, and not necessarily those of Student Life Network or their partners.