If you think that school is where you’ll stop being graded on your performance, you thought wrong! As we settle into our professional lives, we will also get scores based on our financial performances, and these scores are called the ‘credit scores’ a person has. A credit score exists for anybody who has applied for a credit card or currently has a loan.
Companies like Equifax and TransUnion, also known as credit bureaus, manage every person’s credit score and create a report out of it in order to provide it to people who lend loans, employers, and also landlords. The basic function of this report is to give the lender an idea about an individual’s ability to pay back loans as compared to past abilities and repayments.
Almost 90% of Canadian adults own credit cards and all of them will thus have a credit score too. Due to the importance of a credit score being so high, it’s necessary to have a good score on your report. Banks can refuse to lend you money and landlords may refuse to let you take your place for rent if they find your credit score unacceptable! As you go forward in this article, you’ll learn in detail about why your credit score is important and how to improve your credit score as well.
For this very reason, we’ve scripted this article for you. You can now easily learn how to improve your credit score if you’ve had some troubles in the past – we all make mistakes and it’s simple to fix them too!
You must be wondering what the big deal is about fixing your credit score and ensuring that it’s stable enough to be considered by lenders. Hence, the most important reason why you need to learn how to improve your credit score is that a good credit score will land you easier loan approvals.
Once you’re aware of your credit score, you would know just how much money the bank or other private lender is going to lend you too. If you’ve had any sort of trouble with your credit report, then you’ll also be aware of the interest rates that’ll be given to you.
Not only this, but you should know that your employer will check your credit score too! You must wonder why all of that is necessary, but a credit report will speak volumes about how responsible you are as a person and this is the quality that employers seek the most in the people they are going to hire. If you’re taking a job in the finance department then this is even more relevant to you!
According to a survey that was taken place, around 60% of employers will check an individual’s credit report before they finalize their decision over hiring the employee. So before you go ahead and prepare for your dream job’s interview, make sure that you’ve also improved your credit score!
Think again if you believe that your landlord will not do a detailed background check on you, including your credit score! Landlords are usually very picky and choosy over who they would want to rent their properties to, and if they find a few troubles in your credit report then they can refuse to take you in. Rental companies usually do a credit check before they allow you to take over their property, and if they check your history to see missed payments then they might give their property to some other applicant.
Last but not the least, through a good credit score, there’s a better chance for you to negotiate a lower interest rate over loans.
You may still get the loan if you have had a bad credit history on your reports, but the interest rate could still be very high for the lender to make up for the risk involved. If you learn how to improve your credit score, then you might be able to save up on the high interest rates too!
For these reasons, it’s very important to learn how to improve your credit score. A bad credit report can cause you many problems in your life, and it’s better to keep your coast clean rather than deal with the issues a bad report might bring you. Luckily, it’s not that hard to fix your report – let’s find out!
The steps that you take in order to improve your credit score will vary depending on your credit situation. For starters, the basics in learning how to improve your credit score will include a few steps that will apply to almost everybody out there.
The first step of learning how to improve your credit score starts with building your report from scratch. Opening new accounts in your name is an essential and crucial step towards building your credit file. You won’t have a track record of your credit unless you have accounts opened; for this reason, it’s recommended to have active credit accounts opened for yourself.
For the people who are just starting out and are trying to improve their credit score, they can sign up for credit-builder loans or secured cards too. Other than that, a nice reward credit card could also come in handy, one that is without an annual fee. If you know anybody who uses their credit card responsibly, you can also get added as an authorized user on their credit card.
Payment history is the most important factor when it comes to calculating your credit scores, and it’ll only be doing yourself a favour by making payments on time. On-time payments and a long history of them will contribute in providing you with an excellent score on your credit report. This is a no-brainer if you want to learn how to improve your credit score!
There’s a rule of thumb when it comes to making payments – do not exceed loan or credit card repayments by more than 29 days. After 29 days, you can be reported to the credit bureau for non-repayment or late repayment and this will harm your credit reports greatly. You can avoid the hassle by setting up automatic repayments in your bank for the minimum amount due so that there’s no chance of missing a payment just because you forgot about it. However, make sure you do not overdraft your bank account while doing this!
If you’re facing any troubles while paying off a bill, you can always sit down with a representative from your credit card company and discuss the hardship with them rather than ignoring the problem and letting it affect your credit score.
When you learn how to improve your credit score, it’s also important to know that you must take care of every account you have rather than ignore the ones that don’t usually appear on credit reports. For example, gym memberships and subscription services – it would not improve your report if you pay for these on time, but it would cause a negative mark on your report if your payment is late and the account is sent to collections.
If you’ve had any issues paying your bills, you could bring that account to current to help your credit report. A late payment can remain on your account for up to seven years, but if you ensure that all of your accounts are current, you could be doing your credit score a favour. Not only this but keeping your accounts on current would stop future late payments to get added to your history along with late repayments fees too.
Don’t fret if you’ve had credit card debt. You can always speak to a credit counselor and devise a debt management plan (DMP) in which the counselor could be able to bring down your repayments and negotiate lower interest rates, and also get all of your cards to turn into currents.
To learn how to improve your credit score, you will also have to consider everything that affects the report and not just the accounts on the front. This means that even if you’ve done a good job at paying bills on time, you could have a high credit utilization rate only because of high balances in your revolving accounts.
In order to avoid that from happening, it’s crucial that you plan to keep a low balance on your revolving accounts such as credit cards and lines of credit. The people who have a very high score in their credit reports usually have their credit utilization rate in single digits – you should opt to reach that level as well!
It is important to open up accounts in order to build up a credit report, but you need to know that with each credit application there will be an inquiry made. These inquiries hurt your scores and opening new accounts too often might also lead to a decrease in your average age of accounts – all of this contributes to adversely affecting your credit scores. Hence, if you plan to learn how to improve your credit score, start by managing your accounts wisely too!
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In short, this article about how to improve your credit score should come in handy if you’re starting off to build your report or have had trouble maintaining it. There are simple and general things to take care of, and you’ll be handling your scores well in no time!
A credit score is a rating that shows how well you manage your credit in the past. It shows whether you are reliable and responsible when it comes to handling your money.
If you’re a Canadian resident, you should be able to access your credit information through TransUnion.
Based on the score on the Canadian Government website, your credit score should be 680 or more.
Depending on your credit situation, the following steps should be taken to improve your credit score.
1. Build you credit report by opening new accounts to show that you have a record of your credit.
2. Don’t miss payments as it will affect your credit score negatively.
3. Make sure to catch up on missed accounts that are due, try to prioritise these kind of account.
4. Pay most of your account balances when you can.
5. Don’t apply for multiple accounts as this can decrease your score.
It’s important because your credit score will be the one to determine the acceptance of your loan application.