Introduction
Your credit score in Canada is one of the most important numbers that impacts your financial life. It has an enormous influence on your ability to access credit and financing, from getting approved for rewards credit cards and loans to qualifying for the best interest rates on mortgages.
The higher your credit score in Canada, the better off you will be when needing to borrow money or use credit. Having a poor credit score in Canada can mean facing repeated denials for financing and paying much higher interest rates that cost you a lot over time.
Use these tips to start monitoring and improving your credit score in Canada. Following these simple but highly effective strategies can help boost your credit score in Canada and set you up for greater financial success.
Review Your Credit Reports Frequently to Check Your Credit Score in Canada
The first step is to access full copies of your credit reports from both major credit bureaus in Canada – Equifax and TransUnion. You can easily obtain free copies of your credit reports from each bureau once per year. Go through the reports line-by-line to identify and dispute any inaccuracies, errors or outdated information that may be unfairly dragging your credit score down.
Getting mistakes removed quickly before they further hurt your credit score is crucial. Checking your credit reports frequently also lets you see which areas of your credit profile need the most improvement to boost your credit score, such as high balances or high credit utilization. Monitoring your reports allows you to track your progress over time as you work to improve your credit score.
Pay All Bills Completely On Time to Maintain a Good Credit Score
One of the quickest ways to wreck your credit score is to make late payments on bills and debts. Payment history makes up a significant portion of your overall credit score calculation. Set up autopay on all bills to ensure on-time payments automatically each month.
For credit cards, make sure to always pay at least the minimum amount due before the due date to avoid hurting your credit score. Ideally, you should pay off your credit card statement balances in full each month. But if money is tight in a given month, prioritize making the minimum payments on your most important secured debts first to protect your credit score – like your mortgage, auto loan, installment loans, etc.
Even a single late payment on a small bill can quickly do damage to your credit score in Canada if you are not vigilant about paying all bills on time.
Lower Your Credit Utilization Ratio to Improve Your Credit Score
Your credit utilization ratio is the measure of how much of your total available revolving credit you are actually using at any given time. The general recommendation from credit experts is to keep your credit utilization ratio under 30% to maintain a good credit score in Canada.
To lower a high credit utilization ratio that may be hurting your credit score, make a plan to pay down your credit card balances, and limit new credit card charges if you already have maxed out cards. You can also consider requesting higher credit limits from your card issuers, but only do this if you are sure you will not be tempted to accumulate more debt.
Avoid Closing Old Credit Card Accounts to Benefit Your Credit Score
It can be tempting to close unused credit card accounts just to simplify your finances. However, closing old credit cards can actually hurt your credit score. This is because when you close an account, it lowers your total available credit and also reduces the length of your credit history – two factors that are important for maintaining a good credit score.
Keep your oldest credit accounts open and active if possible, even if you rarely use them anymore. An occasional small purchase can keep the account current to benefit your credit score. However, do consider closing newly opened accounts that you may have mismanaged, as keeping these open could further hurt your credit score.
Mix Up Your Types of Credit to Positively Influence Your Credit Score in Canada
Lenders like to see that you can responsibly handle different types of credit, including both installment loans with fixed payments and revolving credit like credit cards. Having a healthy mix of installment loans – like mortgages, auto loans, student loans or personal loans – plus a few open and active credit cards demonstrates financial maturity to the credit bureaus and positively influences your credit score in Canada.
Limit Hard Credit Inquiries to Avoid Hurting Your Credit Score
Every time you apply for new credit – whether it’s a credit card, loan, mortgage, etc – the application shows up as a hard inquiry on your credit report. Too many inquiries over a short period can make you appear desperate for credit and high-risk to lenders, negatively impacting your credit score. Therefore, only apply for the new credit accounts and loans that you have a serious need for to avoid unnecessary damage to your credit score.
Also note that rate comparison shopping for the same product such as an auto loan or mortgage within a 45-day period counts as a single inquiry, so you can shop around for the best rate guilt free.
Check Statements for Errors Impacting Your Credit Score
A study from the Consumer Financial Protection Bureau found that around 25% of consumers had identified errors on their credit reports that could be hurting their credit scores. Always carefully check your statements and reports for inaccuracies and quickly dispute them with the bureaus to get mistakes corrected right away before they further damage your credit score in Canada.
Give It Time and Stay Committed to Building Your Credit Score
Improving your credit score takes diligence, patience, and developing good financial habits practiced consistently over time. There are no shortcuts or quick fixes that will instantly give you a great credit score. But staying committed to smart money management will see your credit score gradually reflect your efforts. Keep up the good habits and be patient.
Conclusion
Use these simple but effective tips to start monitoring and boosting your credit score. Reach out to the experts at Get Approved Canada for personalized help analyzing your credit reports and creating a customized game plan for improving your credit score. Contact us today and invest in building your financial future by improving your credit.
