10 Most Commonly Asked Credit Questions & Answers - Refresh Financial

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10 Most Commonly Asked Credit Questions & Answers

Credit Questions


Credit is complicated. Because of that, we all tend to have a lot of questions about it. Here are ten of those credit questions we notice are asked the most often, along with our best answers:

Q: What is the best number of credit cards to have to my name?

A: There is no one answer to this question. I would suggest that instead of looking at the number of credit cards you have in your name, look at it as a total amount of credit to your name vs. how much credit you’ve used or are likely to use, realistically speaking. The percentage of the credit you have that you’ve used is the number that matters here, and getting another credit card can lower your usage percentage, but there are other things you should consider. Such as the fact that with more credit cards come more minimum payments and more temptation to spend. Whether or not more credit cards will benefit you is going to have to be a judgment call you make based on your own situation.

Read more: How Many Credit Cards are Too Many?

Q: Do I have to have a credit card to improve my credit score?

A: No. You do not need a credit card to improve your credit score. There are many alternative options, such as lines of credit, loans, etc. If your credit score is fairly low, you can even start with a secured line of credit,  a cash secured savings loan or a secured card. Making your payments every month, on time, to a secure loan or line of credit is going to be just as effective as having a credit card and keeping it in good standing.

Read more: Credit Myths: You need a credit card to improve your credit score

Q: Where can I get my free credit reports?

A: There are two credit bureaus in Canada. Equifax and TransUnion. You can download your Equifax credit report on-demand for free by signing up for Borrowell! You'll get weekly updates on how your credit score and credit report may have changed.

Q: What’s the best credit usage percentage?

A: The best credit usage percentage for boosting your credit score is 'as low as you can possibly go'. While it’s important to show that you can use your credit responsibly, keeping your usage percentage as low as possible is both good for your credit score and good for your financial well-being. Beyond just your credit score benefiting, it also keeps the amount of interest you pay out to a minimum. We suggest not rising above 30%.

Q: What’s the best debt-to-income ratio?

A: Your debt-to-income ratio or DTI is going to show lenders what sort of shape you’re in should any changes to your income occur. It is how much debt you have vs. how much money you make. If it’s too high, you’re going to have a lot of trouble paying your debts down if anything out of the ordinary happens to your money. In order to look good to lenders and keep your credit score decent, you want to keep your DTI to below 40%, and as low as you can go from there.

Read more: Debt-to-income ratio - what is it, and how can you find out yours?

Q: How can I improve my credit score without going into debt?

A: Make use of secured credit products. A secured line of credit or a secured card allows you to use money on credit, as long as you’ve put up the funds first to secure that credit. A third option is the credit building program, which uses the program payout as the security funds. This means you don’t have access to the payout until you’ve paid all or a portion of it off, but it also means zero debt and no need to come up with cash up front to secure it with. You can check out Refresh Financial’s credit building program here: Click here.

Read more: How can I build my credit without going into debt?

Q: What is the best method to pay back your debts?

A: There are several options, but a popular choice is the snowball method. This means that you pay just your minimum payment on all but your smallest debt, onto which you put the biggest payment you can possibly make each month. Once the smallest debt is paid off, take the larger payment you were making on it and apply it to your next smallest debt, on top of the minimum payment to that you were making each month. Once that debt is paid off, go to your next smallest debt, with all the monthly funds you were using on the previous two, plus the minimum. Keep doing this, letting the large payments snowball until you’re paying off your largest debt with huge payments every month.

Read more: Which debts should I pay off first?

Q: Is it better to pay back debts or save money first?

A: Many financial experts agree that paying down your debts should be priority number one, because it saves you interest, which is ultimately the same thing as saving money. It will also boost your credit score, unlocking better interest rates for you. However, for some of us, credit usage is an ongoing thing and if we wait until all of our debts are paid off before we start saving, we will never have any savings. A suggestion is to save an emergency fund right off the bat, so if the unforeseen happens, you’re going to get through it. Next, figure out what the right mix of paying down my debts and putting money aside is, according to my own personal situation. If you have relatively small credit card balances but a huge student loan, perhaps only save a little bit each month, opting instead to pour your money into getting rid of your student loan. Once that’s done, you can save all the money you were using to pay off your student loan, all the while ensuring you’re making your regular payments on your credit card debt. Again, though, this is another question that is going to require assessment of your individual situation to answer. What is best for you?

Read more: Should you be paying off your debts or saving money first?

Q: What is the fastest way to improve a poor credit score?

A: The fastest way to improve a poor credit score is with secured credit products. Making sure, of course, that you’ve checked your credit report beforehand and dealt with all the issues you see listed there first, getting a secured line of credit, a secured card, or a credit building program is going to see your credit score skyrocket. As long as you are not missing or late on payments to anything else you owe, these credit products really help bring that score up. Check our credit building program, which doesn’t require you to come up with any security funds.

Read more: Top tips for boosting your credit score fast

Q: How do I get something taken off my credit report?

A: That depends. If it is actually something from your past reflected accurately, you will have to contact the lender and settle up and then likely just have to wait it out until it disappears from your credit report and stops affecting your credit score. If it is an error, you should contact the reporting credit bureau by using the following methods:

Equifax: https://www.consumer.equifax.ca/personal/dispute-credit-report/

TransUnion: https://www.transunion.ca/assistance/credit-report-disputes

You should also contact the lender who sent the information to the bureau and tell them you’ve spotted an error. They will tell you what they need from you in order to take it off.

Then, just make sure you stay on top of the process and check back to make sure your changes have been made.

Read more: What to do when collections show up on your credit report

Bonus Q: Why is my credit score not improving? 

If you think you're doing everything right but you're still getting declined for new credit products, you might ask yourself, why is my credit score not improving? This can be any number of factors but the best answer I can give you is to check your credit report. Your credit report is going to be able to answer why is my credit score not improving? It could just be the number of times you've applied for credit in the last little while.

Read more: Why is my credit score is not improving. 


If your credit score isn't as high as you'd like it to be, consider a credit building program like the one offered by Refresh Financial to boost your credit score!


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