Credit cards and credit scores: An expert's counter-intuitive advice

How to maximize your credit score Mortgage broker Mary Sialtsis explains what you need to know about your credit score.

When it comes to getting a mortgage, a car loan or any other type of credit, your credit score is the most important determining factor, and a personal finance expert says it's important to regularly keep tabs on your score.

"It is hugely important. It is a key indicator on how well somebody manages their money. And it's the number one deciding factor and actually how much interest you're going to pay, whether it's in financing a home or buying a car or even getting a credit card," mortgage broker Mary Sialtsis told CTV's Your Morning on Wednesday.

Sialtsis says most lenders are looking for a minimum credit score of 680, as well as two years of "good credit history," which means not having any late payments or going over credit limits.

Setting up auto-pay for your credit card can be a good way that you never miss any of those monthly payments, Sialtsis recommends.

"In today's busy world, everybody's always rushing around and it is very easy to miss a day for a minimum payment on your credit card," she said. "All financial institutions now offer auto-pay options. Set up an auto-pay so that, on the day that it's due, if a payment hasn't been made, an automatic minimum payment is done so that you're never late."

Sialtsis says it's a good idea to stay within 50 per cent of your credit card limit or lower, if possible, and avoid closing your old credit accounts, even if you no longer use them.

"If somebody starts closing all these different credit accounts, they might look at it and be like, 'Well, why are they closing them all? Do they not trust themselves with this credit?'" she explained. "Again, your score is based partially on how well you manage your money. So if you're seeing yourself suddenly closing all these accounts, they might think you don't trust yourself."

Lenders typically want to see a minimum of two different credit items, such as loans or credit cards. Some Canadians may think it's more financially prudent to stick with debit cards and never get a credit card to avoid debt, but Sialtsis says this approach can hurt your chances of one day qualifying for a car loan or mortgage.

"Even at 18, get your first credit card, get the $500 limit, use it responsibly. Learn how to use it, practice with it, because I've talked to people and they're very proud of the fact that they don't have any credit cards, but that does not help you," she said.

You can also check your credit score for free through Equifax or TransUnion to see how well you're doing. Checking your own credit score doesn't affect your score, but if lenders pull your credit report, that will typically ding your credit score by a few points.

Watch the full interview with Mary Sialtsis at the top of this article.