Let me dispel some credit myths for you. We have seen thousands of credit reports over the years so I am speaking from experience here. The media and banks have done a remarkable job of hiding the truth about minimum payments.
I have seen so many credit reports where a consumer is making their minimum monthly payments and they have an extremely low beacon score; in the 400 - 500 range. But that is because they are carrying balances close to their limits. Usually 75% or more of the limits on average.
So that’s an example when minimum payers have lousy credit ratings.
If you are a minimum payer and are below 50% of your credit limits your score is probably about average. The best credit scores I have seen are folks that pay off their bills in full each month and never carry a balance.
Your total debt owed on your credit report lowers your score, the more debt you have, the lower your score will go, even if you make your minimum payments.
Remember only making your minimum payments will take about 3-5 times what you owe today and about 15-25 years to pay that off. That means $25,000 in credit card debt could very well take 20 years and over $100k to pay off if you are just a minimum payer. This is exactly the client banks love – they dont really like people that pay off their debts in full every month – they call them the “deadbeats” because they make almost no money off them.
I actually heard somewhere that about 1/3 of banks profits come from minimum credit card payers that carry a balance every month.
Go on a fact finding mission and pay $23 for your credit score from the Equifax Canada website. It’s called score power.
You may also find these articles on credit from our website very useful.
http://www.totaldebtfreedom.ca/articles/article_3.htm
http://www.totaldebtfreedom.ca/articles/article_2.htm