How to Maintain a Good Credit Score in Canada

How to Maintain a Good Credit Score in Canada

Posted on August 27, 2022

Your credit score has a huge influence over your financial wellbeing, especially when it comes to borrowing. Building and then maintaining your score is a gradual process that begins when you turn 18 and doesn’t stop.

There are a few things you can do to maintain good credit score though, as our Ayr auto loans team explains.

Avoid the following to keep your credit score high.

Avoid missing debt payments

Your payment history makes up 35% of your credit score and has a huge influence over whether someone will lend to you or not.

Missing a single payment will reduce your score but isn’t the end of the world. Miss more than one and all that changes. Future lenders will want to know why you missed payments and may not want to lend to you at all.

Missed payment stay on your credit report for up to 6 years, so miss them at your peril!

Avoid maxing out your credit cards

Credit cards are known as revolving credit and are part of credit utilization in your credit score. The ideal utilization ratio is 35%. Go over that and your credit score may be impacted.

Lenders will also want to know why you’re in so much debt and wonder how you’re going to pay off the cards when they have such high interest rates.

Avoid too many car loan preapprovals

Car loan preapproval is a popular way to assess whether your loan application would likely succeed or not. What not so many people realize about them is that they can include a hard inquiry on your credit report.

Everyone can see hard inquiries and while credit shopping is a thing, too many hard inquiries cause lenders to wonder what you’re up to.

They can also ding your credit score, so you should only use preapproval when you need to.

Use auto loan prequalification for everything else as they only use soft inquiries.

Avoid spending more than you can afford

It sounds obvious but unfortunately, spending habits are a prime reason why people get into financial trouble.

Maintaining discipline throughout is the simplest way to avoid getting into financial trouble. That means not ignoring slight overspending and being aware at all times of what you spend and where.

It doesn’t mean living like a nun or monk, but does mean living within your means.

Avoid defaulting on any debts

Again, this may seem blindingly obvious, but it happens enough that it needs stating.

If you think you’re getting into financial trouble, be proactive. Discuss the situation with your creditors before you miss a payment or default. Take action beforehand and your creditors will be much more willing to work with you.

Being proactive could help you avoid defaulting and help maintain good credit score. All while keeping your head above water.

We will use all our skill and experience to deliver the lowest possible Ayr auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

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