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How Can I Improve My Credit Score?

It’s a question we hear quite often. The answer is generally unique for each client, but there are some fairly common practices that work for most people. If you follow these general guidelines you will ensure you have a credit score that doesn’t limit your credit options, or cost you money as a result of higher interest rates.

1. Pay your bills on time.

Delinquent payments are treated as red flags. It doesn’t matter whether it’s a $20 minimum payment on your Sears credit card or the $450 monthly payment on your Dodge Caravan. If you are late with either one, they both negatively affect your credit score!  The longer you go without missing any payments, the higher your score will climb!

2. Stay away from your Credit Limit!

Credit cards or lines of credit, always at or over their limit, signal a potential problem with credit management to lenders.  The perceived risk increase can greatly reduce your credit score. Ideally pay your credit cards off each month, but at the very least try to keep them at 75% or less of your credit limits, with 50% or lower helping to boost your score even more.

Example: On a Credit limit of $1000 try to maintain your balance at $750 or lower.  The lower your balance, the better your score!

3. Don’t apply for credit any more than necessary.

If you are seeking credit more than a couple of times each year, your credit score is going to suffer.  Lenders view too many credit inquiries as an indication a person is constantly seeking credit.  Too many new credit lines could lead to over borrowing.  Credit reporting agencies see this as poor credit management.  The end result is a decrease in your credit score from too many inquiries.

4. Always maintain an Active credit account.

Lenders and the credit scoring agencies want to see a steady history of credit management.  If you haven’t had open credit cards or loans for the last two years, you probably no longer have a credit score.  Instead of closing a credit card after it is paid off, think about keeping it active.  Make a small purchase each month on it, and then pay the balance in full.  This ensures your credit history never has any gaps.

5. Be aware of what is on your credit report and fix any problems or errors.

Be proactive.  If you’re not sure what’s on your credit report, order it from one of the credit reporting agencies.  This is the best way to make sure there are no surprises when you are looking for credit.  If you’ve had credit issues in the past and they are still reporting as outstanding, now is the best time to fix them.  Items that are reporting incorrectly could be holding your credit score down.  For example, if you had a collection from a few years ago that you’ve since paid off, chances are it might not have been updated on your credit report.  This would result in a lower score because the credit report still thinks you have an unpaid collection against you.  In this case, you would want to forward a copy of your payment receipt or settlement letter on to the credit reporting agency so they can correct your credit history records.

 

We’ve been able to help people improve their credit scores through the years, and in doing so, have helped them to get into the mortgage they deserved at a much better interest rate.

If you follow these guidelines, it could make all the difference in getting your credit score to a much higher level.  These simple changes could move your credit score from under 600, to right into a nice new mortgage with the lowest interest rates in the market!

To access your credit report, or your credit score, or to submit information to have your credit report updated, here are the links to the two credit agencies in Canada:

Equifax: http://www.consumer.equifax.ca/home/en_ca
TransUnion: http://www.transunion.ca/ca/home_en.page