• I have written in the past about tips on how to improve your credit rating but the other side of the coin talks about the things we do everyday – sometimes unknowingly, that can ruin our credit rating, otherwise known as our beacon scores!

    Many people don’t pay attention to their credit ratings until it’s too late. If you want to purchase a home, own a credit card or even buy a vehicle just to name a few, you need to prove that you can service the debt and pay your bills on time.


    Many people will ruin their credit ratings for no good reason. They miss payments or take on more credit than they can manage.

    Below is a list of things you might be doing that is ruining your credit.

    Missing Payments
    People keep their credit ratings high by making their payments on time. This applies to every kind of credit, including your credit cards, mortgages, loan payments etc. Let’s take a look at your mortgage for example. Most financial institutions will let you miss one mortgage payment. Unforseen things can occur in everyday life, but letting things snowball can put you behind the eight ball before you know it. While some lenders even have this as a built-in feature, (be careful of accruing more interest but I digress) you will still owe the money but pay it later – however missing one payment can lead to more missed payments as once you take advantage of a feature like this, you are apt to take advantage again. Missing two or more payments will incur a black mark on your credit rating and potentially lead you to default on your mortgage. Getting another mortgage in the future will be very difficult.

    Getting too many credit checks

    Some people get multiple credit checks in one year. You might apply for a credit card, buy a car and purchase a house all within 1 year. That’s a problem as this is called credit shopping! Credit agencies don’t like when too many people are looking into your background. It raises red flags and questions, mainly, why are you tapping into so much credit in such a short period of time? Two credit checks in one year is fine; three could have a negative affect on your rating. Don’t confuse this with checking on your own credit score. It is advisable to look at your credit bureau every 6 months to know where you stand – this is known as a soft hit, where credit shopping counts as a hard hit. Hard hits are what the lenders see on your credit bureau’s.

    Having no credit
    Having too much credit is a problem but having no credit is also a problem. Many newcomers to Canada or people who just graduated from school or even people who never worked because they are homemakers or stay-at-home moms, might never have had a credit card because they relied on the breadwinner in the family. However, with no credit at all, it is very hard to qualify for any loan and furthermore you lack a credit history. In order to qualify for credit you need a credit history as lenders need to see how you pay your bills, what your credit history has been and how you would be a potential lendee. My advice is to get a secured credit card (most big banks will offer one) and pay it off in full every month. From there you can graduate with a higher balance on an unsecured credit card, providing you the possibility to qualify for higher credit in the future.

    Having too much debt

    The flip side of having the ability to qualify for credit, is having too much debt. Many people think that if they spread their debts across many credit cards and lines of credit, they are ok as long as they are paying them off or keeping their balances low, or even paying the minimum. While this is true in a manner, you need to keep in mind that only 25% of our gross annual income should be spent on your mortgage payments – what about the other 75%. While you can keep your debt ratio’s in line, what is left to save? It all needs to balance but accessibility to credit may not allow one to keep balanced or put money into savings or even pay down the full amount every month. Having too many credit cards or lines of credit can affect your credit rating if you cannot pay them off or if you start skipping payments.

    Sure, you may pay the minimum, but at some point it’ll be impossible to borrow money — you just won’t have enough cash to go around.

    At the end of the day, credit agencies and lenders like to see that you are paying off your debts. We all carry balances, but the difference is in how long, if you are paying more than the minimum and how long you carry that balance. Everything plays in on the weighting of your beacon score. Being aware can help you plan ahead when it comes to applying and qualifying for credit.

    By avoiding these mistakes you can be assured that when it is time to get that credit you are seeking, you will be in good shape.

    To Your Wealth!

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