The reality of living in Canada is that you need good credit. Major purchases like a car or a house usually mean having to take out a loan or a mortgage. Renters normally have to provide their credit reports before a landlord will approve them as tenants. Even some employers who require a credit check before hiring a prospective employee.
If you’re looking for ways to improve your credit score, then this article can help you do just that.
Know Where You Stand
The first step in building your credit is knowing where you’re starting from. Your credit reports are kept by the two major credit bureaus in Canada: Equifax and TransUnion Canada. Basically, your entire credit history is recorded between the two of them. Your credit score is based on your credit history and can often be the reason you are approved or denied a mortgage, line of credit or any other form of financing. So taking a look at your credit report and knowing your credit score is key to improving it.
Reviewing your credit report can also help you spot and report any errors and catch fraudulent accounts opened in your name. Of course, it’s better to do this regularly.
You can order one free copy of your credit report per year from both agencies, but you have to pay to see your credit score and/or if you want to see your credit report more than once in a year.
If you want to get a free credit check, you can get one through the Toronto based company, Borrowell. Borrowell’s free credit check lets you check your credit score and report regularly without any implications. It also gives you personalized tips on how to raise it.
Keep Your Older Credit Lines Open
An old credit account, even if paid off, is an easy way to boost your credit score, so keep it open. Having a long history of responsibly managing debt is what separates people who have cheap and easy access to credit from those who don’t.
Also, don’t close an older account to open a new one, even if you’re offered a better interest rate. Closing an old account to open a new one is like erasing your credit history and starting over from the beginning. As long as you’re able to manage your account, keeping the older account and all that credit history could help improve your credit score.
Increase Your Credit Limit
If the bank or credit card company offers to increase the credit limit on your credit card or line of credit, doing so could help improve your credit score. Having a lot of credit that you’re not using shows you to be more responsible with your finances. The best practice is to use 30% or less of your available credit. Keeping the same balance with a higher limit lowers the percentage of credit you’re using. Of course, it’s important to continue living within your means and making your payments on time, so the extra limit shouldn’t be seen as “free money”.
Use Your Credit More Often
Again, it’s important not to spend more than you can pay back and to make sure you pay your bills on time. Having said that, the more you use your credit responsibly, the higher your credit score. Write out a budget and stick to it. Keep track of your credit purchases. Set up reminders or automatic withdrawals for your bills. These will all help you successfully manage the increased use of your credit and could help you bump up your credit score.
Don’t Max Out Your Credit Cards
As stated above, it’s not a good idea to carry a balance of more than 30% of your credit limit. The credit bureaus use your outstanding credit compared with your available credit as a factor for determining your credit score. The smaller the gap, the lower your score. Having a high credit card balance also means paying more money in interest, money you could be saving or spending on yourself.
Get a Secured Credit Card
A secured credit card is one that requires a deposit to act as a guarantee on the balance. It’s easier to get approved for a secure credit card, which is ideal for people with no credit history or bad credit history.
Using and paying your secure credit card every month is a great way to show that you’re fiscally responsible and builds up your credit history, which can help improve your credit score.
Diversify Your Credit Accounts
Having a lot of credit cards is not a good idea and will not improve your credit score. However, having and properly managing different types of credit accounts can have a positive effect on your credit rating. An example of this would be to have a credit card, a line of credit and an auto loan instead of three credit cards or just one with a high limit.
Your credit score is vital to your financial health. Whether you need a better score to rent an apartment, get a mortgage or to get better interest rates, staying on top of your finances and following these tips can help you improve your credit score.