Two weeks ago, I found myself in a room full of people that were interested in learning more about the guidelines for having good credit. The presenter and author of The Nine Rules of Credit, Richard Moxley, was entertaining in addition to giving some very practical advice to follow.
Here are some of the takeaways that I got out of it. Some of the points were new to me, while others reinforced my own practice. The Nine Rules of Credit can be summed up in “The Nine Rules of Credit – How to Start, Rebuild and Always Maintain Good Credit”
Keep your Eyes on the Prize
- Have you ever worried about applying for credit because it would be a “hit” on your credit score? I used to believe that each time you go to apply for credit it counts as a “hit”. According to Richard, regardless of what credit you apply for, it only drops the score by 5 points.
- The 5 point drop is for all borrowings that you apply for within 14 days of your first credit application. The “rules” of credit states that you should not get too caught up with the “hit” on your credit score, and really focus on what the underwriter might be thinking when they’re reviewing your application. For example, I can apply for credit at the “Big 5” banks and a few credit unions within 14 days, and it would only drop my credit score by 5 points. What you truly have to keep in mind is what the underwriter reviewing my application might be thinking: “Why is he going to so many different places to try and borrow money?”
- A best practice is to always apply for borrowings with the financial institution you have the strongest relationship with. If you get declined, inquire about why that might be and try another financial institution that you could see yourself working with in the future.
Back off! Build your own Credit
- If someone needs to build their credit, help them get a secured credit card instead of doing a joint application. This will keep you off the hook in a case where that individual is unable to repay their borrowings.
- Although utilities, cell phone, and mortgage payments don’t build credit, they can damage your credit if you don’t pay them on time.
- Credit cards, line of credits, and loans (personal, car, and RRSP) help build credit if you’re paying them on time (ideally a few days before the due date), and paying the minimum amount.
- For credit cards, use them once a month if you’re looking to build credit and at least once every 6 months to maintain your credit.
- According to Richard, you will only know if you have good credit by checking it regularly, as it can change from one day to the next. This statement reminded me of the importance of requesting credit reports from both Equifax & Transunion.
- Ideally, both credit reporting agencies should have the same information, but that may not always be the case, so double check! The credit report is free once a year from Equifax and Transunion. I find dialing their 1–800 numbers to be the quickest way to order it.
Go check out his presentation and play some “Credit Ball” if he’s looking for some volunteers. It’s a good analogy he created regarding the complexity of knowing how to build credit. If you can’t make it that day, he also presents on a webinar. To learn more about Credit, you can attend our free credit workshop here at Momentum!