How Credit Builder Programs Can Help You Improve Your Score

Not only do they allow you to access the credit necessary to make your dreams a reality, but they also affect your ability to rent, finance a car, and often secure housing. That’s where credit builder programs come in — they offer a structured way to develop your credit responsibly. One such option is the KOHO credit builder. This product is designed to help you build your credit score over time and without the risks that come with using a traditional credit card.

How Credit Builder Programs Work

While traditional credit products allow you to access a line of credit, credit builder programs work in a different way. They report your payment history to the credit bureaus each month as an indication of your creditworthiness. You are in a contract to make small, on-time payments each month, proving that you can responsibly manage credit. Over time, this positive data on your report helps your credit score increase.

Why Credit Scores Matter More Than You Think

Credit scores affect so many areas of our lives. Landlords may run your credit before renting you an apartment. Some employers will check your credit when making hiring decisions. Cell phone providers and energy suppliers may ask for a deposit if you have a low credit score. A low score will also cost you more in interest — as time goes on, your loans and credit will be significantly more expensive if you can get them at all.

Common Credit-Building Mistakes to Avoid

Some common mistakes that can weigh down a credit report include late payments, too many hard inquiries, and a high ratio of debt to credit.

A credit builder program manages most of these risks since it operates in a controlled environment where you’re given an opportunity to exercise good credit behaviours. Since your payment activities are also reported to credit bureaus, the main thing to be mindful of is making sure you’re regularly making payments to see results in your score.

Other Ways to Improve Your Credit Score

Credit-building products are effective, but they’re most effective when you employ supplementary good financial decisions. For one, setting up automatic bill payments can ensure you’ll never miss a payment again. Similarly, maintaining a low credit utilization of less than 30% of your available credit can help you keep a good score.

Another thing you can do is regularly check your credit report. Canadians can request free reports from both Equifax and TransUnion. Doing so can help you identify if any errors on your report might be pulling down your score. In turn, you can dispute any inaccuracies that you may come across.

The Long-Term Benefits of a Strong Credit Score

Building a credit score isn’t just about making a play for a few extra points. It means you have a track record that speaks in your favour when you’re ready to make big financial decisions. You’ll gain access to better products, such as favourable interest rates on your mortgage, or if you have a credit card, rewards, or other preferred options. Most importantly, a high credit score will reassure you that you’ll have access to financial products when you need them most.