How to Improve Your Credit Score

Every Canadian should be aware of their credit score. Your credit score measures how risky you are to a bank or financial lender. Essentially what they are looking to find out is that you have a demonstrated record of paying your financial obligations. Once you have obtained your report, read it carefully to find out which factors are most likely having negative influences on your score. If your credit score is not as high as you think it should be, make sure that the information in your credit report is correct. You always have the ability to call the credit bureau that issued the report and inquire about the accuracy of items listed in your report.

Here are some tips, from the Financial Consumer Agency of Canada (FCAC), on how to improve your credit score:

  1. Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
  2. Pay your bills in full by the due date. If you aren’t able to do this, pay at least the required minimum amount shown on your monthly credit card statement. If you are going to carry a balance on a credit card, keep your credit utilization ratio at 35% or below. This means that, say for example, you have a credit card with a $1000 limit. You should not carry a balance that is more than $350.
  3. Try to pay your debts as quickly as possible. Fewer debts will result in a stronger affordability ratio when you are trying to obtain a mortgage.
  4. Don’t go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score.
  5. Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
  6. Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card.

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