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Managing your credit rating

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JunTak View Drop Down

Joined: Jul/29/2009
Status: Offline
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Direct Link To This Post Topic: Managing your credit rating
    Posted: Apr/11/2013 at 3:22pm

Credit cards: Managing your credit rating

By: Kristin Kent

Consider this example: Let’s say a consumer has an outstanding balance of $2,000 on a credit card with an 18 per cent interest rate. Minimum payment is 2 per cent of the balance. This means, the minimum payment would be $40 (or 2 per cent of $2,000).

If this consumer only makes the minimum monthly payment of $40, it would take 30 years and 10 months to pay off the balance in full. Further, the consumer would end up paying $4,931.11 in interest.

If this consumer were to make $100 payments, it would only take two years to pay off the balance in full, and $395.65 would be paid in interest.

Maximizing available credit while making minimum payments can also have a negative impact on your credit report and score.

“Lenders only want you to use 30 to 35 per cent of your limit,” says Elena Jara, director of education for Credit Canada Debt Solutions Inc. “Anything beyond that becomes too much debt load and doesn’t look good.”

Your credit score (also called credit rating) is a number between 300 and 900, the higher the number, the better your score. A high score will help ensure you get the loan or mortgage you apply for down the road.

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