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This time of year always has people refocusing their finances after the holiday season. For some, it is a time for paying down our credit cards. For others, this time of year could have you thinking about leasing or financing a car.

Being approved for a major purchase, as many of us know, relies on having good credit. Some of you out there may be dealing with bad credit, some little or no credit. The finance department at Mississauga Toyota wants to bring you helpful hints here on the blog that you can apply when looking at your next vehicle or just making foundational improvements to things like, yep you guessed it, your credit!

Recommending the use of a credit card to build or repair your credit is not new. Proper management of a low rate, low limit credit card can be a big asset in credit building but (like all credit cards) it can also be problematic if not handled with care. It’s important to remember that no credit history and a poor credit history are different and it affects your credit score differently as well.

Here is a simple, safe way to build your credit using a credit card. Before engaging in these steps you need to be sure you are ready to handle a credit card before you apply for one. This means you are able to stick to your monthly budget, and that you know you will be able to pay it off each month.

1. “Limit The Limit”

Look for a low fee, low-interest cards with a limit of $500.00 or $1000.00. This is plenty to handle any spending that you may need to do in one month. After you receive the card, call and request that your bank will not automatically raise your credit limit.

2. A Zero Balance Is Your Focus

Never charge something to a credit card that you can not pay cash for, this is the easiest way to avoid carrying debt. It’s simple, you build your credit history by showing that you are responsible for paying your monthly payments on time, all the time. The best practice is to pay the full amount each month. By staying within your budgeted amounts on all your spending, you can manage your finances and build your credit history.

3. Just Because You Have It Doesn’t Mean You Have To Spend It

Spending close to or right up to the card’s limit will make your credit score drop. If you have to carry a balance for a few months (now go back and re-read point #2), be sure that you keep the used balance around thirty percent of the available limit. If it goes higher than this, you can see your credit score strength slip away. When you feel you can handle a higher limit, you can periodically request your bank to increase your limit, which shows the bank that you can handle higher limits responsibly.

4. Free Offers Can Actually Cost You

You may be offered electronics, movie passes and numerous other gifts for applying for a credit card. Then you’ll cancel the card as soon it arrives in your mailbox. These canceled cards will find their way on your credit report. Do yourself a favour and decline the appeal of the gifts for the application, it will help you in the long run.

Proper management of a credit card can go a long way to build your credit back up. Remember, they can be easily mismanaged, and if you do not handle them properly you can end up in a lot of financial trouble. If you have any doubts about responsibly managing a credit card, it’s probably best to avoid them until you’re ready.

If you have any questions, feel free to come see us in the Finance Department at Mississauga Toyota!