building credit

[stewie]

did a quick search and didn't find much about this topic.

my question:

I don't have bad credit, ive never missed a bill or anything, however, about 2 years ago I was screwing up with my visa payments, id look at the page online, and without knowing it, for about 8 months I was only paying off the minimum req payment.... :s once I figured out I was doing it wrong, I paid it off on the spot and had it set up to auto deduct on its due date.

but im curious as to how to build better credit faster?

ive heard that getting a 2nd credit card and only using them for the bare minimum, just to keep payments easy and on time can help.

ive also heard that when my visa bill is due, ex the 25th of each month, I currently have it auto deducted from one of my bank accounts, BUT, I was talking with a friend an hour ago, and he suggested having the payment be paid 3-4 days earlier, saying that it would look better?

so, does anyone know how to build good credit fast? I keep my visa at a 2k max (I only use maybe 200$ a month on it at most), I have a 10k line of credit which I opened then paid back within 6 months, a truck that's half paid off...maybe 15k left of in, again, never missed a payment, and a typical chequings/savings account and a high interest savings account, both have quite a bit of money in them.

any secrets to build credit faster? once my trucks paid off im hoping to start looking into buying a house in maple ridge.

[AVS_Racing]

do you have direct deposits for work going straight into your bank account? you can always go into your bank and ask if there's any available credit increases available to you. ie. stuff that you are pre approved for and not have to look up your credit.

it also depends on your income though if you are looking at mortgages.

[stewie]

^ yes direct deposit.

Income is a full time, going on 10 years city worker in an outdoor department...average is around 2700-3000...nothing special but its a steady ft job...
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[Traum]

Originally Posted by stewie

so, does anyone know how to build good credit fast? I keep my visa at a 2k max (I only use maybe 200$ a month on it at most), I have a 10k line of credit which I opened then paid back within 6 months

You might want to modify your credit car behaviours. The thing with credit is, you've gotta use and pay it all back on time to build your credit. So instead of putting only $200/month on your credit card, use your credit card for *EVERYTHING* you possibly can within your normal spending routines. And then you want to pay it all back on time.

[stewie]

I should hide my debit card since I prefer to pay with that or just withdraw a lump sum of money from the bank and use that as my "spending money" for the pay period...get rid of debit card and I'll probably end up stopping all those purchases I make that are under 5$ lol, so my monthly expenses would be up to 3-400$ now lol
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[kluk]

-set up direct deposit
-set up monthly contributions to either your TFSA/RRSP/RESP etc to indicate that you save.
-Pay off all credit facilities on time (if not then at least min payments). If you are 1 day late you get a R1 status on your bureau meaning that a payment has been missed. (R1 status = late payments that are 1-30 days late and it reaches as high as R9. IF you have an R9 forget about getting anything credit related as no one will lend and it is almost equivalent to bankruptcy).

Since you are planning to purchase a home in the near future, try reducing/cancelling some of your existing credit facilities that you don't use because banks see approved credit as potential credit that you can get your hands on and you would much rather have that "approved" credit go towards your mortgage limit then say a 20% interest credit card.

Credit building takes time that's why most people tend to start young.

[stewie]

^ saving, I have 100$ transfer to a high interest account every Monday at midnight, so a guaranteed 5200$ saving a year, + what I save from my pay cheques that I don't use stays in my regular chequings/savings account.
My only bills are 450$ a month for truck that sits in my drive way lol, 80$ phone bill, and my parents only charge me 100$ a month to live at home so I can save( I do a LOT of work...gardening, building ponds, redoing the deck, fence, I'm always doing a house project)
Credit card has never had a late patmynent since I've had it since 2004
So you suggest I cancel the line of credit account? It's pretty useless to me, I used it to buy my bike and paid it back in 6 months which was years ago. I asked to close it once but the teller just said its worth keeping open incase I were to ever need it again.
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[kluk]

you're most likely going to close the line of credit later on anyway when you try to get a mortgage so you can close it then or close it now if you don't use it. Once you have your mortgage you can then try to get a home secured LOC so the rates are much much lower and you could potentially use those funds for home renos etc.

Since you have a good habit in saving and have good credit, its all going to come down to income. When banks use income they use a ratio that calculates total debt service meaning how much of your after tax income is being use to pay off existing debt facilities. In order for them to approve you for a mortgage this ratio has to be below 42% (lower the better).

This brings back to why most people cancel a lot of their credit facilities before applying for mortgages otherwise the bank will use your existing debt instruments and count it towards the total debt service ratio. At the end of the day its all about how much risk the bank is going to take.

[fsy82]

When I got my mortgage I paid off all my loans and credit cards. Talking with a financial planner helped quite a bit as well. Again like everyone else says they bank will do a ratio analysis so try to keep your debt low.

[RickyTan3]

I started building credit when I was young. Now Iam 23. Got some good advice from advisors. Do not cancel your old credit cards because the old credit scores you receive from it will be cancelled as well.

Another thing you won't benefit that much from a credit card with limit less than 5000.

A limit above 10k is really good to show that you can manage money. I have 3 cards and I try to keep them as active as possible.

Just checked my credit score and got 753
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[dinosaur]

Before you do any of that, why don't you check your credit to see where you are currently at?

I am a little confused...do you want to "build" credit (whatever that means) or do you want to ensure you have/maintain/increase your credit score?

Having a high credit score and being debt free is where the banks want you for mortgage approval and having a significant amount of credit available, albeit not used, isn't necessarily a good thing.

If you are concerned about where you are currently sitting or would like to ensure you are on the right path, I would suggest signing up with equifax or transunion. For $10-ish/month you can have credit monitoring and access to your credit reports. If you are wanting to increase your credit score, you can enter a goal and it will provide you with information as to how to obtain it. They will also provide you with your detailed credit history.

When I was doing the mortgage thing, I signed up for Equifax just for piece of mind and ended up keeping it. Now, if I have to apply for credit, I know I'll be approved because I know where I stand.

[l2_narain]

Why don't you take out a loan you can pay back and could benefit you as well?

For example I take out a RRSP loan (basically a loan to put towards your taxes). The rate is prime minus .25%.

So in the end, I have $XXXX.XX amount going to RRSP, only paying a small amount of interest (compare to prime plus 3% usually for other loans) and build my credit.