The Top Credit Building Mistake That Costs Canadians Millions Every Year (Don’t Do This!)

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Understanding your credit score can be quite difficult. Most Canadians have a vague idea of how their credit score is calculated, and what’s important for having a good credit history – such as never missing payments, keeping a low debt load, and having a long history of credit cards and other loans.

But many Canadians are making an incredibly simply mistake that they think is helping their credit score – and it’s causing them to spend millions of dollars per year, with absolutely no benefit to their credit. Curious to learn what it is? Keep reading!

Making This Simple Mistake Could Cost You Thousands Per Year In Interest!

So, what’s the mistake that Canadians are making that’s costing them so much money? It’s simple.

Carrying a balance on credit cards, instead of paying them off in full each month – even if they have the money to pay off the entire balance. A new study from showed that 22% of surveyed individuals thought that carrying a balance on your credit card can help your credit score.

In other words, these people believed that by making a minimum payment, and paying interest on the remaining balance, they were improving their score more than they would if they simply paid the card off in full.

This is simply not the case. There is no benefit to carrying a balance on your credit card. It does not improve your credit score in any way. And, in fact, it can be extremely harmful to your long-term credit.

If you regularly carry a balance on your credit card because you think it helps your credit, you’ve fallen victim to this misconception – and you should pay off your remaining balance right away.

3 Reasons You Should Never Carry A Credit Card Balance

We said it above, and we’ll say it again – don’t carry a balance on your credit card. It won’t help you build a better credit score. Here are just 3 reasons you should avoid carrying a credit card balance.

  • You’ll just waste money on interest – If you don’t pay off your credit card in full, and simply make a minimum payment, interest will be charged on any remaining balance from your previous statement.

    If you pay off $500, and have $500 remaining from the previous month, it will start to gain interest at your APR, which can be as high as 25%.

    However, if you simply paid off your cards in full, you could keep the money you would spend on interest. This is a no-brainer – because spending money on interest doesn’t help your credit score in any way.

  • Carrying a balance can actually harm your credit score – One metric of your FICO score is what’s called your “credit utilization ratio”. This measures how much of your credit you’re using, and how much you have available – essentially, how close you are to being “maxed out” on your credit accounts.

    If you are carrying a balance on multiple credit cards, and your credit utilization ratio exceeds 30%, your credit score can actually drop. But by paying off each of your cards in full every month, you can decrease this credit utilization ratio, and boost your credit score!

  • You won’t benefit from cash back or “points” on your cards – Even making a single minimum payment on your credit card will essentially wipe out all of the rewards you’ve earned on your credit card.

    For example, if you have a card that offers you 1.5% cash back, and you make a minimum payment because you think carrying a balance will help your credit score, you’ll end up paying much more than 1.5% on the APR of your credit card – which makes having a rewards credit card totally pointless.

Don’t Make This Mistake While Trying To Build Credit!

Building credit can be confusing. That’s why we offer so many articles on the subject at the Ride Time blog. Check them out now, and educate yourself on how to build a better credit score.

Need a car in Winnipeg or anywhere else in Canada? Got bad credit? We can help! Check out our selection of affordable used vehicles now, and get the car you need for a great price.


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