Credit cards can boost your credit score. Having a healthy credit score is an important asset and can help you buy or lease a vehicle, borrow for investments and RRSP’s and secure a mortgage to buy that dream home. Boosting your credit score is particularly important to:
- Young Canadians with no credit activity
- New Canadians with no Canadian credit history
- Applicants coming off of a bankruptcy
- Applicants working to repair credit
- A newly divorced applicant who never held credit
For consumers with no credit history or a blemished past its important to get back in the borrowing business as soon as possible to demonstrate that you are responsible with your debts and can manage your monthly budget. Credit cards provide the best means to accomplish this goal. Credit cards are easier to obtain than other forms of credit, and if you are being declined for a credit card you have the option to apply for a secured credit card. Secured credit cards are fully secured with a deposit and offer almost guaranteed approval. It’s not borrowing for the sake of borrowing since you’re using your own money, but it offers you the opportunity to prove your credit worthiness.
Another reason credit cards are an ideal choice to boost your score is that you don’t need to pay any interest charges. Almost all credit cards offer an interest free period on purchases. Simply make small monthly purchases and then pay off the balance each month. This approach will improve your credit score without costing you interest charges.
A significant factor determining your credit score is your utilization percentage. If you have a credit card with a $2,000 limit but only owe $200, then your utilization is only 10% which will boost your score. Conversely if you owed $2,000 on the same credit card then your utilization would be 100% which would hurt your credit score. Credit cards allow you the opportunity of building your credit limits which if properly managed will boost your credit score.
If you’ve been declined for credit, don’t get discouraged, help is nearby. Boost your credit score back to where it belongs with well managed credit cards.