What should contribute to the decision to refinance your mortgage? Here, we review the key factors to consider.
Now that winter is over and summer is just around the corner, a lot of home owners have to clean up their yards. The snow has melted and tends to leave your lawn looking a little rough. Cleaning up your lawn for those summer months and making it have a nice curb appeal takes time and effort. The same goes for fixing a damaged credit score. Recovering from bad debt, like a consumer proposal or personal bankruptcy, takes a little elbow grease to make it look desirable again.
How can a credit card improve your debt?
Using a credit card is a great tool to help you clean up and recover from your bad debt. If you have credit issues, using a credit card is one of the fastest and most effective ways for you to recover from bad debt. If you use your credit card responsibly, like paying the balance on time every month and keep your credit utilization ratio below 65 per cent, you can nurse your credit score back to life fairly quickly.
A secured credit card is a type of credit card that requires a security deposit to “secure” the line of credit for the card. Typically, a secured credit card is used by consumers who have no previous credit history but can also be used to help someone rebuild their credit. This can mean by growing your credit history or by improving your credit, which is done by making on-time payments.
How can you increase your credit card limit?
You may be able to increase your credit limit as you continue to make your monthly payments and improve your credit score. Using your card frequently and never going over the limit will help increase your chances of increasing the limit. You can use your card for necessities, such as gasoline and groceries, and then pay them off each month.
Moreover, making sure your monthly statement is never higher than 50 per cent to 65 per cent of your limit and making regular payments towards your balance a month will help increase your chances of getting a higher limit. So, if you use your card for those necessities, you may need to pay off your card a couple times each month to keep that statement close to zero.
Can new credit help you?
Some consumers may hold onto a credit card, even when they file and pay off a consumer proposal. Additionally, many have a monthly student loan payment or mortgage to pay off as well. While these are good for the health of your personal credit history, they don’t carry much weight when you are looking to apply for a mortgage. The more new credit you have the better – especially credit that is taken on after a bad credit event.
Mortgage lenders don’t LOVE seeing new credit when a borrower is applying for a loan. Opening a new card most likely means that you’re using less of your total credit, which can help your score. But consumers should be aware that new credit determines 10 per cent of your credits score. So, opening several new credit accounts in a short period of time can actually hurt your credit score. Be sure you are only charging what you can afford to pay off on your new card and make your monthly payments on time to avoid hurting your score. Open a new line of credit on an as needed basis and not just to attempt to boost your credit score.
If you’re looking for some guidance on how a credit card can help you recover from some bad debt, get in touch with us here. Our knowledgeable staff can help you fix your damaged credit score with a little bit of elbow grease!