Understanding Your Credit Report and Credit Score

Building a credit history

• How can a credit card help?
• How can you maintain a good credit history? (Do's & Don'ts)

How can a credit card help?

It is important to have a credit history. If you don't have a credit history, you can begin building one by using a credit card - as long as you use the credit card wisely!

When you apply for a credit card, the card issuer will check your credit history with one or more of the credit-reporting agencies, to find out whether or not you are likely to pay back the money you borrow with your credit card.

If your credit card application has been approved and you start using your card, the issuer reports any activity on the card to the credit-reporting agencies. For example, the issuer will tell the credit-reporting agencies what your outstanding balance is and whether or not you are making the required monthly payments on time. This helps you build a credit history.

If you are having difficulty obtaining a credit card because you have no credit history, you are new to the country, you have recently filed for bankruptcy or you have had credit problems in the past, a "secured credit card" might be appropriate for you. To obtain a secured card, you will need to deposit a sum of money with the credit card issuer. Your credit limit is normally set as a percentage of your deposit. Making all your secured credit card payments on time can help you build a credit history, or rebuild a poor one. Once your credit history is considered satisfactory by a credit issuer, you may be eligible for a conventional type of credit card, such as a low-rate or standard card. For more information about secured credit cards, consult FCAC's publication entitled Credit Cards and You.

How can you maintain a good credit history?

There are a number of things you can do to build and maintain a good credit history. Here are some important do's and don'ts.

Do's

• Pay your bills on time.
  
  
• Try to pay your bills in full by the due date. If you aren't able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
  
  
• Contact your creditors if you are having trouble making payments.
  
  
• Make sure that your monthly account statement is correct.
  
  
• Read the statements and other material you receive from your credit card company carefully. Keep up to date on any fee increases or changes in your card's terms and conditions.
  
  
• Deal with companies you know and trust.
  
  
• Get a copy of your credit report from the two credit-reporting agencies at least once a year and make sure they are accurate.
  
  

Don'ts

• Don't accept or use any form of credit until you understand and are comfortable with its terms and conditions, to avoid any misunderstandings between you and the credit issuer.
  
  
• Don't wait to report any unauthorized transactions on your account. Contact your credit issuer immediately if your bill includes items you did not buy.
  
  
• Don't go over the credit limit on your credit card.