A Canadian financial expert has some credit card tips for you in case you went overboard spending money, especially during the 2020 holiday season.
Nanji spoke with Narcity and shared his tips to get people back on their feet to reach their 2021 financial goals and rebalance their credit score. He even debunked some myths associated with it.
Can last year's holiday credit spending impact your 2021 financial goals?
According to Nanji, it's very common for Canadians to enter a New Year with more debt due to holiday buying.
In fact, Equifax reportedly surveyed more than 1,000 Canadians and found that 19% of them regretted their holiday spending when their credit card bill arrived.
This could also mean that people have less available credit and a lower credit score as a result.
Nanji says that having a good credit score can benefit Canadians in many ways such as easier approvals for renting an apartment, qualifying for a mortgage or a car loan.
How can they rebalance their credit score?
Nanji shared that getting your credit score back up is possible with a few steps.
He says the first major tip is to create a detailed budget for yourself by calculating your income, fixed expenses, flexible expenses and debt payments.
Next, he says to determine any expenses you could cut back on like dining out or any monthly subscriptions you might have in order to reduce costs.
He also shares that you should know what debts you need to repay as well as their due dates.
"To help keep your credit score balanced, always try to make your credit card payments before the statement due date and before the payment due date. This will help to increase your credit score at a faster rate."
Are there any credit score myths you should ignore?
Apparently, there are many myths that can actually cause more damage to your credit score says Nanji.
The first misconception he says is that closing a credit card will help improve your credit score.
According to him, cancelling a credit card only decreases your available credit, limits the credit history for that account, and possibly, your credit score too.
Next, he says it is a myth that checking your credit report will hurt your score.
"Checking your credit report via a soft credit inquiry will not hurt your credit score. But for example, if you apply for numerous credit products, a hard credit inquiry must be completed."
The last common myth he says is the idea that carrying a balance helps boost your credit score. Nanji shares that this all depends on the percentage you owe on your credit cards.
"Having an account balance close to your total credit limit suggests you have been living in credit and may be considered a high risk."