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Do you have a poor credit score due to late payments or excessive use of credit, for example? Whatever the reason, you can always improve your credit score by adopting sound financial habits. Here’s how.
10 tips for improving your credit score:
Let’s begin by reviewing the definition of a credit score. A credit score is a number that lets financial institutions know if you’re able to repay a loan on time. In other words, the banks check your credit score to decide whether or not to grant you a loan. Credit scores are between 300 (the lowest rating) and 900 (the highest rating).
A credit score below 659 is considered poor. If your credit score is between 300 and 559, your loan applications will most likely be denied. Equifax and TransUnion are the two credit rating agencies in Quebec. Both organizations offer free credit reports. Simply submit your request online. For more information about the factors used to determine your credit score, please read Five Factors that Impact your Credit Score.
Improving a poor credit score depends on a number of factors and your personal situation. It could take a few months or even several years.
Fortunately, there are several strategies for boosting your credit score.
As is often said, making a monthly budget will give you an insight into the expenses that got you into debt and allow you to change course. Use our free online budgeting tool to calculate your budget.
One of the ways to boost your credit score is to pay the balance of all your credit cards every month. If you make only minimum payments, you’ll have to pay high interest on top of the amount that you owe. Make do with one credit card. If you’re paying the balance of one credit card with a second card, you’re creating an endless cycle of debt.
Be disciplined. As mentioned above, if you don’t pay your bills and loan payments on time and in full, you’ll have to pay interest. If you’re having trouble meeting the deadlines, schedule automatic withdrawals.
Even if you qualify for a $3,000 credit limit, you should aim to use no more than half of what is offered to you. Reaching your credit limit each month will negatively affect your credit score.
If you keep your old accounts open, you’ll build up a good credit history, which lenders always appreciate. This will also reflect your financial stability.
Request a credit report every year and check that there are no errors. TransUnion or Equifax will send your credit report in the mail once you fill out an online request form.
Your debts have a negative impact on your credit score. If you’re unable to pay back all the amounts owing on time, contact your creditors and see if they can offer an interest-free payment arrangement over several months.
Regardless of whether your loan applications are accepted or denied, submitting several credit applications in a short space of time can signal an urgent financial need to lenders that can negatively affect your credit score. Each credit application usually generates a credit check that can affect your score.
To continue strengthening your credit score, show your future lenders that you have a stable lifestyle by keeping the same address and the same job.
Start out with a loan that you can easily repay such as a credit card with a security deposit. Over time, this will show your creditors that you’re reliable.
In short, your credit score will improve over time if you adopt good financial habits and are patient. However, if you’ve accumulated debts and can’t see a way out, call on one of our licensed insolvency trustees. They can help you to find solutions.
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