The Importance of Credit History

 
Here is why you need to have credit and the importance of building a Canadian Credit History

Building a good credit history is important for your financial health. If you ever want to borrow money for a vehicle, house, phone or even
utilities. A good credit score can mean the difference between your loan being approved or denied.

Credit agency such as Equifax and TransUnion, in Canada keep track of your credit history on file and keep track of how you use credit,
including credit cards, lines of credit and mortgages. They also keep track and see if you pay your bills on time. All combined, this
information is used to help create your personal credit report and credit score.

The importance of establishing a solid credit profile is exceptionally important as most likely at some point in your life you will need to
borrow money from lenders, for major purchases like a house or a vehicle. Establishing a solid credit profile means you will have a
better chance of being able to borrow money at the lowest interest rate. Having poor credit profile will make it difficult for you to borrow
money, you can even have difficulty finding employment or a place to live. It is common for landlords and employers to access your credit
profile.

Credit Cards can both help and hurt you credit profile. The easiest way to damage your credit is by defaulting on a loan or credit card bill.
It's also easy to damage your credit by consistently paying your credit card bill late. Payment history is one of the most important factors a
credit agency uses for determining your credit score. Defaulted accounts, or those in collections, can linger on your credit report for
several years.

By paying your credit card balance on time and in full each month your credit report will reflect a positive payment history - typically
boosting your credit score over time. If you cannot afford the entire balance by the due date, at least pay the minimum balance due.
Credit Utilization is the percentage of your available credit actively in use. This is the second most important factor in determining your
credit score. If you use a large percentage of your available credit, lenders could view you as a higher risk and that can lead to a lower
credit score (even if you pay your credit card balance in FULL each month). 

The length of your credit history also plays an important roll. Lenders prefer lending funds to a borrower with an established credit
history rather then someone with no history at all. The longer you have a credit card open and in good standing, the better it is for your
credit score. Which is one reason, getting your first credit card can also be the most important one!

Lenders, employers, and landlords all use credit history to see if you are a suitability applicant. Making mistakes with credit cards and have
costly long-term effects. Use your cards responsible this will help you in the long run.