Whether you're looking to rent an apartment, get a mortgage, or looking at car insurance, there's no getting around the fact that your credit score matters.
Too many Canadians are unaware that they have a less than favourable credit number, or how it got that way. If you're one of the thousands of Canadians living with a less than favourable credit number (between 300 and 659), one of these five credit score pitfalls might just be the culprit.
Despite numerous accuracy checks, errors can still occur, and creditors can make mistakes. That's why it's a good idea to review your credit rating periodically. Incorrect information can drag your credit score down, fast. If you have a common name or an often misspelled surname, it's especially important to make sure everything on your file is really yours.
If you find an error, you can take steps with the reporting agency to correct the mistake and put your rating in a better light.
Too many credit inquiries from multiple sources
Each time you inquire about interest rates and receive a personalized quote, the potential lender pulls your credit history. Credit bureaus understand the need for comparison shopping and generally allow a grace period of about two weeks. Beyond that, however, each quote you get will show up as a separate and unique credit inquiry – and each independent query is a ding on your credit score. Saving money is a good thing, but not if it costs you points on your credit rating.
Carrying unpaid bills can also cause your credit rating to plummet
Did you forget about that library late fee from 10 years ago? Your credit rating hasn't, especially if your account was sent to collections or marked as "delinquent." The good news is, the majority of times, you just need to make the outstanding payment to resolve the issue.
To check your credit rating for issues like these, you can get a free annual report from credit-reporting agencies TransUnion and Equifax.
Too much credit card activity/ maxing out your credit card
Do you use your credit cards daily? Do you pay off your balances fully each month? Is your credit score still suffering?
Despite paying the balance in full, maxing out your credit card every month can harm your score. How much credit you have versus your how much you spend is called your "credit utilization ratio." A high credit utilization ratio hurts your overall credit score. Whenever possible, try to keep low balances on any lines of credit.
Think of it this way: If you have a $2,000 personal line of credit and each month you spend $1,999, you'll soon see a ding on your credit score, despite paying off the full amount monthly.
Too little credit card activity
An often overlooked way to ruin your rating is by not using credit at all. If you don't have a credit history, there's nothing to prove you're one of the responsible ones who successfully manages your money. And old, inactive accounts can automatically close, taking an additional bite out of your score.