Your credit score is a little number that has a significant amount of influence when it comes to matters of personal finance. It’s what will determine if you get approved for acredit card or not, if you qualify for a line of credit, or if you can get a mortgage and at what rate.
Here are a few tips on how you can improve your credit score and keep it on the high side:
First things first, you need to know what your credit score is and if it’s not pretty, what’s causing the problem.You can purchase your credit score (and receive a free credit report) from Canadian credit bureaus Equifax and TransUnion. While your credit score will reflect the risk you pose as a borrower, your report will include a history of your borrowing, and your current credit outstanding.
First, obtain a credit report. If your record contains debts that have gone to collections it is your responsibility to make sure that they’re removed. You can revive your credit score by paying off those debts and then requesting that the creditors remove the collection notations from your credit report.
Always pay the balance or the interest owing on your debts a few days before it is due. That way, if the due date falls on a Sunday or holiday, you don’t have to worry about the payment clearing late and this appearing on your credit report.
Reduce your balances to less than 75 per cent (preferably 50 per cent) of your limit. Although you might have a credit limit of $3,000, keeping your card maxed out looks bad. In fact, the credit bureau will penalize you for continuously maxed-out credit. It is recommended that you pay your debt and lower it to less than 50% of your credit limit. This will keep you in good standing with the credit bureau.
Avoid applying for credit unless you have a genuine need for a new account. If you end up applying for a few different credit cards in a short period of time (the sign-up discounts offered on store cards can be enticing), or if you’re searching for a mortgage and trying to get pre-approved by a few different lenders, the credit bureaus will likely start to think that you’re in financial trouble and your number will drop.
You should check your credit score once a year to make sure there are no mistakes on your file or that you haven’t been a victim of credit fraud. The Credit Gods are not perfect, so if a mistake happens it’s your responsibility to fix it.
If you have poor credit, just remember that as time goes on (if you pay your bills on time and use a wise amount of debt), your score will eventually improve. It just might take a few years.