What is a credit rating?
A credit rating is a three-digit number, normally between 300 and 900, that banks and other lenders use to find out how likely you might be to repay your loans. The higher the number, the more creditworthy you might be to the banks.
Your rating is predicated on information out of your Canadian credit history, comparable to whether you pay your phone bill and utilities on time and in full every month. The problem is that lenders do not have information for newcomers and others with out a Canadian credit history. This makes it difficult for people to get a loan.
Your first bank card in Canada
If you might be young, latest, or have never used credit in Canada before, you only need to start out. Credit cards themselves are types of credit, so step one is to get an entry-level bank card and prove your creditworthiness by paying your bills on time. Then you possibly can work your way up.
Entry-level bank cards typically offer fewer perks than premium cards, but in addition they typically have lower income requirements and a lower annual fee—in some cases $0.
mycredit Mastercard of the National Bank is an excellent example. There isn’t any minimum annual income requirement to use for this card and no annual fee, making it very reasonably priced. And while the mycredit Mastercard doesn’t include all the advantages included, you need to use it to earn 1% money back on recurring bill payments and restaurant spending and 0.5% on the whole lot else.
If you would like more features and rewards, Platinum Mastercard of the National Bank is a superb option that also doesn’t require a minimum income. World Elite Mastercard of the National Bank has an annual fee of $150 and offers other perks – including annual travel reimbursement of as much as $150.
4 suggestions for using bank cards
You already know that it is best to use your bank card responsibly, but what exactly does that mean?
- Stick to your budget
Most entry-level bank cards have modest credit limits. Still, it is vital that you simply don’t spend greater than you possibly can pay back, no matter your limit. This is usually difficult for brand new bank card holders, but budgeting is an important a part of your financial health. - Pay the total card balance
The neatest thing to do is to repay your bank card on time and in full every month. Interest rates on bank cards are very high, so when you carry a balance, your debt can quickly mount up. Stick to your budget and do not overspend. - Pay the minimum amount
If for some reason you possibly can’t pay a bill in full, be sure you pay no less than the minimum amount shown in your bill. Credit card firms report your payment history to the credit bureaus, and even one missed payment will lower your rating. You can avoid this by making the minimum payment (or more) by the due date. - Pay your bill on time
Being punctual is just as necessary as paying minimum payments. It shows the credit bureaus that you would be able to meet your financial obligations. If you would like help remembering your due date, consider organising an automatic payment through your online banking.
When it involves bank cards, it is best to work toward paying on time and in full every month. Each payment helps construct your credit rating by showing that you simply use credit responsibly, and over time, it’s possible you’ll develop into eligible for upgraded financial products with more features and advantages.
