What are Credit Tips?

Credit tips are important for consumers. These helpful suggestions allow people to cope with all kinds of problems with credit cards, credit ratings and scores. These are also expected to come in handy for difficulties to cope with loans or mortgages.
This article is more of a guide for consumers especially credit card holders. It also mentions credit card tips from Canada Banks as well as pointers about credit reports, files, scores and ratings.

What are Credit Card Tips?

CanadaBanks.com published the following tips for credit card holders: The first credit card tip is – Don't carry a balance on your credit card. If you can pay all your credit card bills in full each month. If you really have to carry balance on the card, consider using cheaper borrowing alternatives like personal line of credit.
Do not take cash advances. With most credit card purchases you have grace interest free period, during which you can repay what you spent on the credit card. If you pay your credit card bills on time, you do not have to pay a single cent in interest charges. This is not the case with cash advances. With cash advances, the interest is charged from the moment you get the cash advance until you have repaid it in full. When taking cash advances, the credit card issuer might charge you a service fee. If you really have to get a cash advance, then try to pay it back as soon as you can.

Choose your credit card carefully. Don't get just any credit card, but do a thorough research before applying for one. Don't be fooled by the enticing no interest credit cards advertisements and reward programs. Choose a credit card which is right for you and you'll be able to easily manage.
Use pre-authorized payments to pay your credit card bills or pay them always on time. By using pre-authorized monthly credit card bill payments you are ensuring that your credit cards are paid on time and you won't be charged any interest. Credit card debt is one of the most expensive loans you can get.

What are Credit Reports and Files?

Your credit history is recorded in files maintained by at least one of Canada's major credit-reporting agencies: Equifax Canada and Trans Union Canada. This is kept along with the credit histories of millions of other people. It is possible to obtain your credit file for free. Please consult the agencies' websites in order to obtain more information. These files are called credit reports. A credit report is a snapshot of your credit history. It is one of the main tools lenders use to decide whether or not to give you credit. Your credit file is created when you first borrow money or apply for credit. Companies, which lend money or issue credit cards to consumers, send specific factual information related to the financial transactions they have with you to credit reporting agencies. These are including banks, finance companies, credit unions, retailers.

What are Credit Scores and Ratings?

Your credit score is a status of your financial health. There are many different ways to work out credit scores. The credit-reporting agencies Equifax and Trans Union use a scale from 300 to 900. High scores on this scale are good. If your score is high, it implies lesser risks for the lender. Lenders may also have their own ways of arriving at credit scores. In addition, lenders must decide on the lowest score you can have and still lend you money. They can also use your score to set the interest rate you will pay.
Some credit-reporting agencies report the lenders' rating of each of your credit history items on a scale of 1 to 9. A rating of "1" means you pay your bills within 30 days of the due date. A rating of "9" means that you never pay your bills at all or that you have made a consumer debt repayment proposal to the lender. A letter will also appear in front of the number: for example, I2, O2 and R2. The letter stands for the type of the credit you are using.

• "I" means you were given credit on an instalment basis. This can be a car loan, where you borrow money once, and repay it in fixed amounts. This should be on a regular basis and for a specific period of time until the loan is paid off.


• "O" means you have open credit such as a line of credit, where you borrow money, as needed. This is up to a certain limit and the total balance is due at the end of each period.


• "R" means you have "revolving" credit, where you make regular payments in varying amounts depending on the balance of your account. You can also borrow more money up to your credit limit. Credit cards are a good example of "revolving" credit.

The most common ratings are "R" ratings. These are known as North American Standard Account Ratings and are the most frequently used. The "R" indicates that the item being described involves revolving credit. If you always pay on time, it will be coded an R1. If an amount was written off because you never paid it back, it is coded R9.

Care in Credit

As responsible consumers, it is important to make sure that you settle all payments on time. This is the only way for you to maintain good credit scores and ratings. If you do this constantly, you will surely encounter little problem in managing your credit reputation.

References

canadabanks.net
ic.gc.ca
ic.gc.ca