What affects your credit score?

When you are getting a credit card for the first time -- you are bound to have lots of questions. Even if you have had a credit card for years... you probably still have lots of questions. Credit cards are powerful and having a good credit score is very important. If you have a good credit score then your life will be much easier. So what can affect your credit score? Do you know? I did a little research and Banknerd.ca has an awesome article on this topic. The article mentions six things that affect your credit score.

1. Late/Missed Payments

Missing a payment is the most common reason for a low credit score. When you are unable to make a payment within the due date, you are usually charged a late fee and more often than not your interest rate is increased.

2. Account is Sent to Collections
When point number one is not paid for a while... your creditor can send your account charges to a third party debt collector. When this is done, it means that the creditor does not believe that you will pay, and has hired someone to collect the money. This is not good.

3. High Credit Card Balance

Carrying a high balance is not good for your credit score. You should try to keep your credit card balance low, as it will not cost your credit score points.

4. Maxing Out your Credit Cards

This might seem obvious, but maxing out your credit cards will have a negative effect on your credit score. Understand the limit of each of your credit cards, and try to use less than 40% of the limit. If your limit is causing you problems, remember you can always inquire about getting it raised -- if needed.

5. Incorrectly Managing your Older Credit Cards

There are two fatal mistakes a person can do with their older credit cards. One is closing their old credit cards while a balance is still on it. The second is not even keeping your old credit card. The older the credit card the older your credit history. Keep your old cards active and in the end you will benefit from it.

6. Filing for Bankruptcy

When you file for bankruptcy you are hurting your credit score so much that it will stay on your financial year for about 7 years. This will make it hard for you to make major purchases, and in general get any sort of credit.

If you can avoid these things, then you are likely to not only avoid lowering your credit score, but you will possibly raise it as well. So stay on top of it! And if you have questions, inquire! And I would definitely recommend getting the Servus Young and Free chequing account because not only do you not have to worry about monthly fees, but the employees are the branches are amazing. They are SO helpful and friendly that it is so easy to get knowledgeable answers you need -- fast. 

Happy Monday! :)

Kelsey