8 Tips to Improve Your Credit Score – Credit Best Practices
Hello, and welcome back to my channel! For this video I’m going to be talking about something so exciting. Okay, I lied… it’s no super exciting, but it’s something so important. And this is just I feel like a lot of people don’t know these very important things when it comes to credit. So yes, I’m going to be talking to you about 8 different things you need to know about credit. These are some best practices, these are some things that you should be implementing into your day to day finances. They’re very simple. Lots of them are kind of no-brainers. But it’s just a really good reminder of what to do and what not to do to make sure you are improving you are improving your credit score and you’re doing things so they won’t hinder your credit score. So, in this video I’m gonna share 8 different credit best practices that you definitely want to know about. Alright, number 1 is don’t abuse your credit cards. Sounds very obvious and simple, but a lot of people you know, don’t really know how to use their credit cards properly. And that’s okay if that’s you. Don’t feel bad. It’s very easy to fix. All it means is whenever you make a purchase on your credit card pay it off in full. Don’t just pay the minimum balance. Make sure that every time you get that monthly statement you are paying off the full amount that you owe and even if you want to be a little crazy like me you can pay it off as soon as you make a purchase. Or, whatever system works for you. Maybe you want to pay off your credit card daily, or weekly, or bi-weekly. Whatever the case is you want to make sure that you are paying it off and it goes to zero. Number 2 is be responsible with your debt. So that just means you most likely, most likely, have more than just a credit card. You might have a line of credit or a mortgage, student loans, car loan, whatever. We want to make sure that you never miss a payment. That you never pay not enough. We want to make sure that you are paying the full amount you owe every single month. Because if you don’t do that it could and most likely will negatively impact your credit score. Number 3 is pay your bills. Your bill payments come into play with your credit history and your credit score, so make sure whatever bills you have, your phone bill, your utilities, your rent, whatever, you are paying the full amount every single time or whatever the payment sequence is. Number 4 is don’t max out your credit cards. I know, you may have never even thought about this but just because you have a $5,000 limit on your credit card, that doesn’t mean that you should make it go to $5,000 then pay it off. $5,000 then pay it off. Actually what you’re supposed to be doing is spending between 20–30% of that credit limit. If you spend more than that it will signal to that lender and the credit bureaus that you’re overextended and it’s just not a good look and it can negatively impact your credit scores. So, there’s a couple things that you can do. Obviou sly, if you have one credit card and you keep on spending 80% of that limit, you can increase your limit so you are always just spending between 20-30% on that card. Another thing you can do is get more credit. Either by getting another credit card or a line of credit. Now, I’m not suggesting go and get a bunch of credit cards and lines of credit or get more debt. You know how I feel about debt. I hate it. It’s awful. But that’s just something to be aware of, that you really aren’t supposed to be spending more than 20-30% of your credit card limits otherwise it may negatively impact your credit scores. Number 5, don’t cancel your oldest credit card. Some people think that’s a myth but no. It’s actually pretty logical. You see, that oldest credit card has the longest credit history associated with you. So especially if you’ve been really good with that credit card and have always made all of your payments on time, it will have a good reflection of how you deal with credit and that will positively impact your credit score. If you cancel that credit card, then that credit history will no longer be involved when those credit bureaus are looking at all those different elements to determine what your credit score should be. Now, if you’ve alreadty canceled your oldest credit card it’s okay, it’s not the end of the world. But you probably have the second oldest credit card, so make sure to maybe keep that. And if you’re like “Wait, that credit card, I pay a really high annual fee and I actually hate that card, I want to get rid of it.” You can contact that credit card company and ask to downgrade that card, preserve your credit history though, make sure that they are going to preserve your credit history, but downgrade it to a no annual fee card so you can still keep that credit history, you still have that credit card, but you don’t have to pay that annual fee. Another to remember though is most of these credit cards will charge you an inactivity fee if you don’t make a purchase within 12 months, so just put it in your calendar to make one purchase a year. That’s what I do with my oldest credit card. I make one purchase a year, and then I don’t get charged that inactivity fee. Number 6 is do not open too many credit cards. So if you have too many credit cards it may also make you look bad. It may negatively impact your credit score because it may signal to lenders that again you may be overextending yourself. Typical rule of thumb is just to have 1 to 3 credit cards. You can probably have more than that and I’m sure it may not negatively impact your credit score. It really depends, but the key thing is don’t have too many. 10 is probably too many. So especially if you really get into this whole credit card churning thing to get those points or rewards or cashback or whatever. If you open too many of them, especially in a short amount of time it will ding your credit score. Number 7 is check your credit reports. Now, this is something you should be doing at least once annually with both your Equifax Canada credit report and your TransUnion Canada credit report. So make sure you put it in your calendar as a kind of yearly to-do list. But the great thing is that you can check your credit reports with both bureaus for absolutely free. I’m gonna include some links below to the applications. You just have to fill them. mail it to them, then they’ll mail you your credit reports for absolutely free. But the thing that you’re going to be looking for when you get your reports is any mistakes or inaccuracies or any fraud actually. fraud actually. So this is something that you just want to make sure that you’re on top of. Now if you do see any mistakes on your credit reports, especially if it has anything to do with your name, your address, your work history, anything like that, then you go to the bureau directly to say “Hey, there’s a problem, you need to fix this. It may be negatively impacting my score because there’s something wrong with the information that you input into my credit history. Now, if you find on your credit report that it says you have a credit card that’s still open but you know that you went through the process and closed it the first thing that you’re going to want to do is go to that credit card company and say “Hey, you misreported something can you please fix it?” Now, if they say “I don’t know what you’re talking about, it’s closed on our end, there’s nothing we can do.” Then you can go to the credit bureau to see if they can fix it. And number 8 is check your credit scores. If you have no idea what your credit scores are, that’s okay. There’s plenty of different ways you can go about it. Really what your credit scores mean is not how good you are with your money or how much your net worth is or anything like that. It’s really just a score that shows lenders or creditors how credit-worthy you are. So, how responsible have you been with credit in the past. And if you have a high credit score, then those lenders who will give you maybe a mortgage or car loan will be more open to giving you a bigger loan at a better interest rate than if you had a lower credit score. So that’s really the whole point of credit scores. It has nothing to do with how good you are with your money. And they’re not something to obsess with. It’s not a grade on how good you are. It really is just showing “Hey, how responsible have you been in the past? Do we trust you with us lending you some money. And will you pay it back?” So the reason you really want to have a good credit score is for if in the future you do want to get say a mortgage, then you will hopefully get a really good rate and also the amount you need to borrow. So that is it. Those are the 8… should I go through them right now so you don’t forget? Okay, let’s go through them real, real quick. Number 1, don’t abuse your credit cards. Number 2, be responsible with your debt. Number 3, pay your bills on time and in full every time. Number 4, don’t max out your credit cards. Make sure to spend only 20-30% of your credit limit. Number 5, don’t cancel your oldest credit card. Number 6, don’t open too many credit cards. Number 7, check your credit reports at least once annually. And number 8, check your credit scores. Now, you don’t have to check your credit scores often. Maybe just do it once annually or if you are preparing to get a mortgage or some other type of loan, that is a good time to check it. But I feel like there’s no harm in checking it. I’m gonna go more into how to check your credit scores in my next video, so get ready for that. I hope you enjoyed this video. I also have a freebie download for you. If you go to jessicamoorhouse.com/creditbestpractices or just check the link in the description you can download a free PDF of everything I just went through. Now, if you liked this video, please like it. If you have anything to say, if you have a question, if you have an idea for a future video, make sure to comment below. And of course if haven’t already, make sure to subscribe to my channel. See you next time!