5 Things you are Doing Wrong with Managing your Credit

At Canada Drives, we want to help you secure the car loan you require. We also want you to understand that as you work to rebuild your credit score through an affordable car loan – there are many insightful credit managing tips that we can share with you to enhance this process.

Here are 5 things you may be doing wrong managing your credit – and with this awareness, comes the opportunity to reverse this situation for the better.

#1: Not Keeping Track of Credit Balances & Having Too Much Overall Debt

Starting off, it is important to be aware that 30% of your credit score is based on how much debt you have. To be even more precise – the ratio between how much you owe in credit is divided by the total credit limit you have. Therefore, if this ratio totals more than 30%, then this will lower your overall credit score.

All in all, it pays to keep an eye on your individual credit card/credit line balances and make sure they are not too close to their limits. Overall trying to continue to pay off some of your debts can help you keep these limits as low as possible.

#2: Making Late Payments

As I’m sure you already know, bills, credit cards and loans come with regular payment due dates. However, when you miss making these payments on time – this does impact your credit score rather negatively. Just like credit balances account for a certain percentage of your credit score – late payments also account for 35% of your score.

In the end, by continuing to make late payments over time, this can absolutely wreak havoc on your credit score – at 35%, this credit behaviour is one of the most significant factors in determining how healthy or how poor your credit score will be.

#3: Applying for Too Many Lines of Credit or Credit Cards

While, in some cases, it may be that you are the one receiving various credit offers on a regular basis – in other cases it may be that you are actively shopping around for more credit on your own. Either way, if you have been applying for too many credit cards and loans, this can also be a culprit as to why your credit score is declining.

Referred to as ‘hard inquiries’, meaning you are seeking out new credit sources on your own, well these actions also affect your credit score and accounts for 10% of your credit rating tally. While occasionally this is a good thing – if done too often it can appear as if you are struggling and need more credit to cover your expenses, and in turn accumulating a higher volume of debt.

#4: Not Monitoring Your Credit Score

While it is common for credit scores to shift slightly from month to month, it is atypical for them to change more drastically during that short amount of time. That being said, there are instances where scores can dip rather significantly within that time frame, and this is something to be quite concerned about. If, for example, your score declines by 25 or 30 points, perhaps there are some negative credit habits you may need to change.

The overall credit faux-pax here is that you may not have been monitoring your credit score as closely as you should. By making sure you are continuing to manage your various credit transactions as effectively as possible, should hopefully mean that you can try and avoid seeing your credit score decline dramatically in such a short period of time. All in all, the more aware you are of your actions, the better you can be about changing this behaviour.

#5: You Have Not Been Using Credit for Very Long

While, of course, it is true that you have to start somewhere when it comes to beginning to use credit – it is also true that new credit users will have a lower score and a poorer credit history – due to having a shorter credit history or even having no credit history at all.

Regardless of your age, it is actually the age of your longest standing credit account in combination with the average age of all of your accounts that are factored into your credit history and score. For example, ultimately having 7 or more years of credit history can make for a higher credit score – determining 15% of your score to be specific.

Even though, it does take time to build a better credit history in this area – there are actions you can take to begin to build a history as soon as possible. Actions such as applying for a secured card – which can be a less risky first credit card option to obtain, and in turn you can start building a stable credit history – and a rising credit rating.

When all is said and done, being aware of the precise impact these credit actions are having on your credit score is one of the best methods of setting yourself up for credit management success. With this knowledge in hand, hopefully, you can turn your overall credit situation around for the better – and then before you know it, you’ll also be turning the key to that new vehicle you so desire.