Money woes: we all seem to have them to one extent or another. We recently chatted with the loveably-sassy and money-savvy Gail Vaz-Oxlade, host of the popular reality TV series Til Debt Do Us Part to find out her thoughts on credit scores. Read on for some dos and don’ts from the money expert herself about what Canadians can do to maintain a good rating—or improve a less-than-stellar one.
“DON’T make too many credit card applications.”
Collecting too many credit cards could make your credit score drop. Even if the cards have zero balances, having too many is not a good thing; multiple open accounts could raise a red flag to a potential lender who may question what would happen if the account holder succumbed to temptation and maxed out all their cards.
“DON’T get too close to your credit limit.”
Be wary of getting too close to your credit limit as this will have a negative impact on your credit rating. “For example, if you have a card with a limit of $1000, don’t spend more than $600 on it,” suggests Vaz-Oxlade. You want to maintain a healthy credit to debt ratio, otherwise lenders will perceive you as a loan risk since it appears as if you are constantly maxing out your credit cards.
“DO make the minimum payments on your credit cards on time and regularly.”
If you’re paying online via your bank account, Vaz-Oxlade advises that you factor in the time and the date of your payment so the money is wired to the credit company by the due date: being late with a payment by even one day will count against you on your credit score. You also have to be making payments on a regular basis; if you tend to miss one every second or third month, you’ll have a spotty credit rating which will make it more difficult to negotiate better terms on loans and accounts you apply for in the future.
“DO pay off more than the minimum balance every month.”
Credit cards are not a form of supplemental income—they’re for convenience, and should be paid off in full at the end of every month. According to Vaz-Oxlade, if you’re only making the minimum payment, “you’re a dope.” Why? “Because you will never pay off your debt since the interest owed will just keep piling up.
Vaz-Oxlade agrees those who are looking to secure a loan (for a house or a car, for example) should be concerned about having a good credit score, however, she also stresses that a good rating in itself “is not the be all and end all” of one’s financial health. “What’s fundamentally important is learning how to live within your means, making a budget and tracking your spending.”