How to Build and Manage Your Credit: Expert Advice from Sarah Astles
Welcome back to the Brick x Brick podcast! I'm Roxann Klepper, and today we’re diving into a crucial topic that impacts many people—credit. To help guide us through the ins and outs of credit, I’m joined by Sarah Astles, an experienced mortgage broker with The Mortgage Group. We've been working together for years in Red Deer & Central Alberta, attending open houses and helping clients navigate the real estate and mortgage process.
Let’s start with the basics. Why do you need credit, and what happens if you don’t have it?
What Is Credit and Why Is It Important?
Credit is a way for lenders to determine whether you’re a trustworthy borrower. When you open a credit card, take out a loan, or apply for a mortgage, they look at your credit to understand your repayment history. If you don’t have credit, lenders have no way to assess how reliably you pay bills, which can prevent you from qualifying for things like loans or mortgages.
Sometimes, you can get creative by showing proof of paying rent or bills like insurance, which don’t show up on traditional credit reports, but without any credit history, lenders typically won’t approve you for a mortgage on your own.
What Is a Credit Score?
A credit score is a numerical representation of your creditworthiness, and it's something that gets pulled whenever you apply for credit. There are different kinds of credit pulls. As a mortgage broker, Sarah uses an Equifax Beacon 9 score, which is different from the score you might pull yourself. Your consumer score and a score pulled by a car dealership or mortgage broker may not align, with differences of up to 100 points depending on how your credit utilization is reported.
What Ranges Do Credit Scores Fall Into?
Credit scores range from 300 to 900. A low score of 450 could indicate missed payments, collections, or even bankruptcy, while scores in the 600s to 700s are considered good, and 750+ is excellent. A person with no credit score—like someone who’s just turned 18—would have a “no score” rather than a low one.
How to Improve Your Credit Score
If you’re working to improve your credit, Sarah has some key tips. The quickest way to boost your score is to pay off any outstanding debts, like consumer proposals or bankruptcies, and make sure they’re reported as paid. You should also aim to keep your credit card balances below 50% of your limit. For example, if you have a $5,000 credit limit, try not to carry a balance over $2,500. Consistently paying off your balance can lead to a 50–100 point increase in as little as 30–60 days.
If you have no credit or bad credit, opening a new credit card or loan can help build your score. The key is to use the credit responsibly—don’t max out the card, and pay it off in full each month.
Managing Credit Wisely
Revolving credit, like credit cards, has a major impact on your score. High utilization (using too much of your available credit) can hurt your score quickly. However, consistent, responsible use of credit, such as keeping balances low and paying bills on time, will improve your score over time. If you’re hesitant to open new credit lines, consider starting with a low-risk option like a cell phone contract or a small, manageable credit card.
How to Check Your Credit Score
You can pull your credit score using tools like Credit Karma or through apps provided by banks. It’s a good idea to check your score a couple of times a year to ensure everything is accurate. Sometimes, errors—like loans showing as unpaid or incorrectly closed accounts—can negatively affect your score. Monitoring your credit regularly helps ensure your score reflects your true financial habits.
Next Steps
Whether you’re starting to build your credit or trying to fix it, the best practice is to use credit responsibly and pay it off consistently. Remember, it may take time, but with patience and discipline, you can improve your credit score and set yourself up for success in future financial endeavors like purchasing a home.
If you have questions about credit or need mortgage advice, don’t hesitate to reach out to Sarah. She’s always happy to help!