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2 Sure-fire Ways to Improve Your Credit Score

Worried about a low credit score? There are a number of ways to improve your credit score and bolster your financial future.

In this podcast, we asked our Licensed Insolvency Trustees (LITs) to talk about the negative effects certain spending and borrowing behaviours can have on your credit score. They also offer advice and tips for changing those behaviours and improving your score. Here’s more detail about two tips discussed in our podcast.

  1. Review your credit history

If your credit score is lower than you’d like, you may have some ideas about why that’s the case. Maybe you’ve missed payment or two, or you carried a large balance on your credit card for a bit too long.

The best way to really understand your credit score is to review your entire credit history. You can get a full report for free once a year from TransUnion or Equifax. You’ll be able to see all past and present credit cards, credit lines, and loans that have contributed to your score.

Look closely at your credit behaviour. Start by checking for missed payments. Is there one account or service in particular you routinely forget to pay on time? Check for high credit card balances. Is there any non-essential spending (like subscriptions or restaurant meals) that are increasing your debt load that you should consider dropping?

Reviewing your credit history on your credit report is also a good way to see how far you stretch your credit limit and what effect your charges are having on your credit utilization ratio.

Check out the blog at Million Dollar Journey to read one perspective on why checking into your credit score and history is an important habit.

  1. Get to work building a new credit history

A good credit history depends on you using credit regularly and responsibly. A debt load that is too high can make lenders nervous. They may consider you more of a risk for default, or needing some sort of credit relief. Don’t close your loan or credit accounts, but do use the following strategies:

  • Keep your credit utilization ratio at or below 30 per cent.
  • Make a payment schedule, and set reminders in your calendar, phone, or financial app to ensure you make those payments on time, every time.
  • Make more than minimum payments.
  • If you’re asked for consent for a credit check, ask if it’ll be a “soft hit”, or a “hard hit.” Keep your hard hits to a minimum to prevent lowering your score. The Financial Consumer Agency of Canada website offers a simple explanation of soft hits versus hard hits.

Increasing your credit score starts with knowing which of your credit behaviours are contributing to a lower score. Make a plan to show that you use credit responsibly and build on good credit behaviour each month.

Do you review your credit history? Tell us on Twitter. #CreditScore #Debt #MoneyManagement

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