You go through years of schooling, educating yourself to be ready for the real world when the time comes. You learn everything from tying your shoes to the history of countries nowhere near Canada. But the one thing they never teach you is about your credit and how it works. It’s amazing that something as simple yet very important like your credit will have an impact on your life in the years to come.
Coming out of high school or even still in school, everyone knows someone who ended up with a credit card or a department store card. Getting this card was the best thing that happened to the person who got it. It was the new stereo for the room, the new snowboard for the hill, or even new clothes to clean up a little. Then came the payments for the card, oops how am I going to be able to do this?
It’s very important to teach your loved ones the importance of credit. Being a Mortgage Advisor I have seen numerous of credit bureaus with credit blemishes that follow the reason of “I made some mistakes growing up.”
something as simple as missing payments on your new credit card can hurt your credit for up to 7 years. This will be the difference of getting that new car or the mortgage for your starter home. Or you may be able to get the car loan but you interest rate just went from 0% financing through a dealer to 19% through a finance company.
Lets say you get your department store card and you spend the $1000 and you make your minimum payments of $30. This simple $1000 credit card will take you 5.4 years to pay off. Thats a long time for a little amount. A lot of these cards will increase you credit limit as you get close to it hoping you keep spending as well.
I am in no way saying that credit is a bad thing, credit is a great thing. Just make sure you use it properly. Here is a couple little tips to help build the credit and keep it manageable.
– Keep your cards from going over 75% of the credit limit. If you have a credit card of a credit limit of $1000, if you have to carry balance, try to keep it below $750. 50% is even better.
– Call your credit card company and ask them to NOT raise your credit limit. Keep your limit at a manageable amount should you hit a rough spot and need to pay it out completely. Keep them from increasing the limit and encouraging the spending.
– Make your payments on time. This is a simple thing but often overlooked. if you have a department store card and you make your payments at the department store, pay at least 10 days before the due date. Paying at the store does not apply the payment to the card the same day, it often takes a few days.
– Pay more than the minimum payment. It doesn’t have to be a lot more, but try to make more than the minimum payment.
– Don’t keep applying for more cards. Don’t just apply for a card to get that 10% off your $100 bill. if you get approved you will be tempted to go back and spend more money.
Just teaching these simple things to your loved ones will make their life so much easier when they do need to apply for that big purchase they will eventually do in their life.
Don’t just get a mortgage, KNOW your mortgage.
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Scott Bourke, AMP
Dominion Lending Centres Regional Mortgage Group
866/403-343-1125 Phone 403-343-1126 Fax