D. Smith: Pay your bills and keep your credit rating positive

There are key ways to build a good credit history. Pay on time—even a day or two past the due date will hurt your credit rating.

Our credit history begins when we start to borrow money and it continues throughout our lifetime.

When we borrow money, our credit history is reviewed to find out if we are a good risk or a bad risk.

We want to be a good risk. When we are a good risk, we can borrow money at the best interest rates available for consumers. We want to maintain our best credit rating possible to keep interest rates low for current and future consumer loans, mortgages or student debt.

In Canada, we have a credit bureau to track the creditworthiness of individuals.

If we are late with our credit card payment or loan payments, the credit bureau tracks this and shares this information with banks and credit unions.

Borrowing money to increase our net worth is a good concept. Borrowing money to decrease our net worth is not a good concept.

Credit cards have become a standard and acceptable for everyday use.

Before you charge something on a credit card— ask yourself is this a step forward or a step backward?

Credit cards are good if they are used to increase our net worth and if they are paid off as quickly as possible.

Credit cards can erode our purchasing power when we pay high interest rate debt month after month. The improper use of credit cards can ruin our credit history.

There are key ways to build a good credit history. Pay on time—even a day or two past the due date will hurt your credit rating.

Pay off your credit card in full each month.  Do not fall into the habit of paying only the minimum balance. Remember that makes you poor and the credit card companies rich.

Check the interest rate charged on your credit card statement—9 per cent, 18 per cent or 28 per cent interest.

Approximately half of all people pay interest rate charges every month.

Cash advances end up costing extra financing charges. Interest is charged on typically the first day you borrow it—so the high interest rate costs start adding up as soon as you have accessed the money.

This is not free money —you pay for the convenience of cash advances.

Don’t share your credit with another person unless you know they are as disciplined as you in keeping an excellent credit history.

Many people get in relationships and blend their credit cards and loans with a spouse and end up in debt or bankruptcy.

You should check your credit history on a regular basis—sometimes mistakes are made.

Contact Equifax and specify what information is incorrect or what information does not belong to you and they will verify this information for you.

Check your Equifax credit history at www.equifax.com to request your free credit report or to verify your credit information.

Kelowna Capital News