A recent online survey* revealed that a significant number of individuals are concerned about their ability to pay monthly bills, with nearly half of respondents expressing worry. In fact, one-third of those surveyed are contemplating taking on additional jobs to supplement their income. Rising costs of everyday essentials, such as groceries, electricity, and housing expenses, have become increasingly burdensome for many individuals. A particularly alarming finding from the survey is that 23 percent of Canadians have missed bill payments this year due to financial constraints. While missing a single bill payment may not seem significant, it can have adverse effects on your credit score.
Having a lower credit score can impact your chances of qualifying for a new loan, securing a mortgage, or obtaining a lower interest rate. Consequently, this can result in paying more for the same amount of debt. To help you manage your debt effectively while safeguarding your credit score, here are six essential strategies:
1. Look for savings in your budget
Start by using a budget planner to track your monthly income and expenses. Identify areas where you can cut back on non-essential spending and replace costly items with more affordable alternatives.
2. Delay big purchases
If you find yourself in need of borrowing money, ensure that you only borrow what is necessary. Avoid taking on unnecessary debt by postponing significant purchases until you are in a more financially stable position.
3. Pay your minimum payments on time
Make it a priority to pay at least the minimum payment shown on your bill statement by the due date. Late payments can remain on your credit reports for up to six years. By regularly checking your Equifax credit report through myEquifax, you can monitor any late payments that may have been reported.
4. Pay more than the minimum payment
If possible, strive to pay more than the minimum payment required on your credit cards and lines of credit. This approach helps you pay off your debts more quickly, reducing the amount of interest you will ultimately pay. Additionally, it can have a positive impact on your credit scores. Paying more than the minimum also lowers your credit utilization ratio, which is a factor in calculating your credit scores. You can conveniently check your credit utilization ratio from your myEquifax dashboard.
5. Regularly check your credit reports
It is crucial to log in to myEquifax regularly to review your Equifax credit report and ensure that your personal information is accurate. Any unfamiliar accounts appearing on your report could be indicative of identity theft. Additionally, you may discover old accounts that you had forgotten about, which could be affecting your credit scores.
6. Consider credit counselling
If you find yourself struggling with debt, credit counselling can provide valuable assistance. Credit counselling services can help you assess your financial situation, resolve debt-related issues, and gain a better understanding of budget management and credit rebuilding techniques.
By implementing these strategies, you can effectively manage your debt while protecting your credit score. Prioritizing timely bill payments, reducing debt, and regularly monitoring your credit reports are essential steps towards financial stability and improved creditworthiness.
*An online survey conducted between September 15-18, 2023, using Leger’s online panel gathered responses from 1,564 Canadians. The margin of error for this study was +/-2.5 percent, 19 times out of 20.