How Much Credit Is Too Much Credit? | Refresh Financial

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How Much Credit Is Too Much Credit?

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A recent Canadian Payroll Association survey found out that nearly half of all working Canadians surveyed are living paycheck to paycheck. Drowning in debt, most survey respondents told the association that they don’t envision ever living debt free.

What is Too Much Credit

This brings up an important topic. How much credit is too much credit, and what happens when we have too many different credit products in our name?

One of the biggest reasons you want to limit what credit you do open in your name to a minimum, is that every new credit product means a new minimum payment. Even if you try to keep your spending down on them, chances are you’ll need to make a minimum payment on each credit product you carry even a small balance on. If you have two credit cards with a minimum payment of $10 every month, that’s just a $20 expense each month added to your bills, rent and other payments. However, if you have 4 credit cards with $10 minimum payments, a loan, and a line of credit, you’re probably exceeding $200 in credit payments each month.

It Lowers Your Credit Score

If you’re applying for a lot of credit in a short time frame, you’re also going to take a hit to your credit score. What that looks like, on paper, is that you have found yourself in some sort of financial dire straits and are fishing for anything lenders will give you to get out it. Even if you have a good explanation, and it’s not that you’re in money trouble, it still looks that way to the credit bureaus and future lenders. If you must seek out new forms of credit, space it out by several months or even a year. Don’t pile it on all at once.

Don't be Tempted by Too Much Credit

Opening new forms of credit can, depending on your spending habits and self-discipline tendencies, tempt you to make use of more credit. If you tend to spend, you could find yourself in more debt than you can handle. Keep your debt low, by not opening new forms of credit. That way, you don’t have to exercise your self-discipline every time you’re faced with a purchase opportunity - instead, use your self-discipline once to say, “no more credit”. If it’s not there, you can’t spend it.

Pay Off What You Have

While it is good for your score to have a more diversified mix of credit accounts in good standing, it can be difficult to maintain this. If you’ve struggled with your credit in the past, and you’re looking to improve your score, opening new lines of credit is not the answer. Instead, pay off what debts you already have. Paying down debts is going to boost your credit score. It is the fastest way to a better credit rating.

Like many things in life, there is no quick fix. It’s good practice to only take out the credit you need.

Do you think it’s a good idea to keep your credit accounts to a minimum? Let us know in the comments!

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    What Canadians are saying about Refresh

    I would like to thank Refresh Financial for helping me get out of a bad spot. I never thought it was possible and almost gave up on things and then I saw Refresh Financial and and gave it a try. At first I was unsure of things but to see my credit score now makes me a believer in this program.

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    Refresh helped me regain credit following a nasty divorce, which left me with a very poor rating. They were able to remarkably help me go from a 480 to a 600 score, in just over a year. Thank you Refresh!”

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    I have watched my credit score jump since being with Refresh and I have already recommended it to friends and family. Thank you for helping me build my credit faster for my future and my children’s future :)”

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    At first I was skeptical because I wasn’t getting funds upfront and had to make payments when I really needed the money. I’ve been in the program a year now and have noticed my credit has improved drastically!”

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    I have been a client of Refresh Financial for approximately 3 years. Since being a client they have improved my credit immensely. Definitely recommend this company to anybody that needs help re-establishing credit.”

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    Refresh Financial is an amazing program to help people get back on their feet. I was rock bottom with nowhere to turn. My credit was beyond poor. I would recommend them to anyone. If I can do it surely anyone else can.”

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    “Great company to deal with for rebuilding credit, very simple process to get started. Good service if you ever have questions.”

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    This business truly cares about its clients. The customer service is always quick to return calls or emails. Their online portal functions very well so as a customer you are always updated as you progress with your loan.

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    “Refresh Financial has made us more aware of how to take care of our financial situation and be more responsible, and making payments on time is rewarding in the end for credit. Thank You sincerely.”

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    The financial services products are excellent for new immigrants, low-income earners and small business owners. Loans, savings and credit building all in one solution is a perfect fit to help with financial goals and stability.”

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    I’m so excited I’ve joined refresh! I’ve already seen a huge increase on my credit after the first month! The staff are a delight and make this so easy to understand. I strongly recommend Refresh Financial even if you have good credit this will give you a boost and you’re saving money with the reverse loan!”

    – Wayne B