BRAMPTON – This week we’re talking about credit! How much do you know about credit? Do you know your credit score? How about the difference between a good credit score, and a bad credit score? Well BG and Faith Biyapo of TD Bank break down all of this and more on this episode of Building Better With Brandon.
When asked what people considered a good credit score, some people guessed as low as 500, while others guessed over 850. While people considered a bad credit score anywhere between 400 and 550. But what do the experts have to say?
“Credit scores range between 300 and 850,” explained Biyapo, adding that 300 is not so good, while 850 is excellent.
But why is a credit score important?
“A credit score is important because it helps you to borrow money with the understanding that you will pay later,” Biyapo explained.
Biyapo shared that people with higher credit scores are more attractive to lenders. He also shared some tips on how to increase your credit score quickly and effectively. He says the first tip is to review your credit score.
“Once you do that you have to come up with a plan. Do you want to start by focusing on the low-hanging fruits? So paying off the lower credit balances, or do you want to consolidate all of your debt?” Biyapo explained.
The Different Credit Cards
There are also several different types of credit cards, including traditional and prepaid cards. A prepaid card is loaded with a certain amount of money, and while it doesn’t affect your credit, it has benefits for credit-building behavior.
“It helps you in terms of building the behavior to pay off your bills and the mindset of knowing that you’re purchasing on credit,” he explained.
So pre-paid cards are kind of like training wheels!
Common Credit Card Mistakes to Avoid
Not paying off your credit card, spending beyond your means, borrowing loans, and not paying them back… These are all great ways to destroy your credit score. They’re also very common mistakes.
“People don’t pay their balance on time and what then happens is they start to accrue interest on top of the balance,” Biyapo explained, adding that it leads to a higher debt than what was initially spent on the card. He says that your credit utilization also matters.
So if you have a credit limit of $10,000, and you spend $9,000, you’ve almost maxed out your card. This is high utilization. Biyapo says this is something people should be trying to avoid as it signals to lenders that you’re in a tough situation financially.
He also advises avoiding making big purchases without a careful plan to pay them off, or without thinking about the implications of taking on that much debt.
“You want to plan ahead for that. You have to come up with a plan that works for you. That’s why at TD we have the Black Customer Experience,” Biyapo added, sharing that TD has several programs to bring financial support to different communities.
Tips to Build Good Credit
Paying your bills ahead of the due date, taking control of your expenses by not spending more than you earn, using your credit card properly, and paying off your debt right away are all easy ways to build your credit.
“I think it’s very important that they speak with a financial advisor at any of our branches, they can walk in and get trusted advice in terms of how to maybe set up a credit card. Start with a very low limit and work their way up,” Biyapo shared.
“I would encourage them to make sure they get a job. It’s important to have income coming in to pay off your balances whenever they are due,” Biyapo added.
Brandon and Faith dig into the benefits of having a good credit score, the difference between a statement date and a due date and more on this episode of Building Better With Brandon.
