Why young people should start building their credit profile now
Experts say establishing a solid credit rating is key to building life-long financial stability and not throwing away money on high interest payments.
One of the main factors lenders will review when reviewing a mortgage application is the applicant's credit score, so setting the expectation for responsible borrowing is essential. It is easy, especially for those just starting out, to fall into the cycle of borrowing beyond their means. This article from the Globe and Mail explores how borrowing responsibly can become an important asset later in life.
One example of building a credit rating responsibly is to obtain a credit card, use it for day-to-day purchases, but ensure the balance is paid in full every month. This allows the borrower to build a solid credit rating and never have to pay interest. Achieving this goal requires a great deal of self-discipline, but will be of significant benefit when applying for a mortgage.
Other smart ways to build credit include cellular phone contracts, student loans or student lines of credit. Keeping a watchful eye on your personal credit score is also important, and easy to do with the assistance of Equifax or TransUnion Canada. Both companies offer the option to have your personal credit file mailed to you for free, enabling you to review and explore where there could be room for improvement.
For more information, feel free to contact an Ottawa Mortgage Broker.
To read the full article from the Globe and Mail, click here.