Having access to debt is critical in our society, and the way to unlock it is with a healthy credit score. Many young people and university students are inundated with offers of credit cards that they readily accept without fully grasping the responsibilities they’re taking on. Missing a few credit card payments or loading up on too much credit card debt can leave behind damage that can take years to fix. Bad credit as a young professional or adult can limit or delay approval to debt that can be used to start a business, pursue more education, get a mortgage, or obtain a loan or line of credit.
Some young people learn these lessons the hard way, others are very careful and prudent with what debt they take on and how they behave with it. At the least, one should aim for a ‘good’ credit rating; a score between 660 to 724. This should open most doors for most debt products, except at the most conservative lenders and if desired credit amounts are massive. A ‘good’ credit score should be the precursor to a mortgage approval. The higher your credit score, the lower the interest rate you pay on most products. In the U.S. car insurance payments are linked to credit scores for example. Anything between 725 to 759 is ‘very good.’ The best possible rates are offered to those who have credit ratings of over 760, the ‘excellent’ mark.
Solutions to bad credit require patience, discipline, and consistency. You have to make minimum payments routinely, you have to reduce overall debt levels, but still need to keep revolving credit products in use – they are important for building and maintaining your credit.
Canadians live off of huge amounts of credit. They have to. Few can buy the home or car they want without drawing on some form of credit. The average Canadian has a credit rating of 650, but a considerable number of people have very good or excellent scores and maintain them carefully. In Q1 of 2021, data showed that the average 18-25 year old had some $8,000 in non-mortgage debt. This is the benchmark, if you’re under this amount, you’re doing better than most Canadians. If you exceed it, it’s likely you’re stretching your credit score and dishing out a lot of money in interest payments.
Non-mortgage debt levels rise and peak as Canadians enter middle age. 26-35 year olds carry an average of $16,000 in debt. 36-45 year olds have $25,000, and 46-55 year olds carry just over $30,000 in debt. Canadians who are older than these brackets generally have declining debt levels as they retire and pay off their mortgages. When we add mortgage debt to the mix, debt levels balloon massively, and with higher interest rates, the servicing of all this debt becomes an increasingly difficult problem. A Tembo debt consolidation loan is a possible solution to bad credit for young people, especially if you have multiple credit products you need to clear (lines of credit, credit cards, car loans, etc.). You can exchange multiple payments and products into one simple, clear, and convenient payment. Your credit score will improve, and you will save interest payments – especially as rates keep rising!