How To Improve Your Credit Score: Six Tips

By: Justin Leung on June 24, 2014
Thinking about taking out a mortgage or applying for a credit card? If so, you should definitely make sure your credit score is as good as it can possibly be. Here are six tips to help you take your credit score from good to great.

(1) Check Your Credit Report.  Start by requesting your credit report from either of the two main credit bureaus in Canada, Equifax or TransUnion. Ordering a copy online only takes a few minutes, and will allow you to see both the contents of your report and your credit score.
Most people are initially quite surprised by how thorough their credit report actually is – in fact, your credit report (should) contain detailed files on every penny of credit extended to you in the previous six years. This includes information on all of your available credit lines, your payment history and the amount of credit you have access to.  Scan the document thoroughly to make sure it is free of any errors or omissions. Remember, industry experts say nearly 25 percent of all credit reports have some sort of mistake in them!
You should also take a look at the credit score on your report. Scores range from 300 to 900, and if you’ve paid all of your bills on time and don’t carry high credit card balances, yours should be above 650. Generally, borrowers who are considered to have excellent credit have a score above 700.
(2) Bring Down Your Balances. You might have heard the military phrase “strategic drawdown” before, and it very much applies to improving your credit score as well.  That’s because a major factor in calculating these scores is the so-called “credit utilization ratio” or the amount of credit you’re using versus the amount of credit that’s available to you. Basically, the higher your credit balances are relative to your total credit limit, the more it will harm your credit score. By paying down your credit balances, you’ll save money on interest and improve your credit score at the same time!
(3) Sign-Up For Automatic Payments. Nothing damages your credit score like late payments. Get with an automated payment program as soon as possible so that you’ll always make your bill payments on time.
(4) Keep the Old Debts On Your Report. Some Canadians erroneously think they should get the debts that they’ve paid “in full and on time” struck from their report. That’s a mistake – any evidence that you’ve successfully paid off a loan will help, not hurt your credit score.
(5) Keep Old Credit Lines. Although it’s counter-intuitive, keeping old credit cards and lines of credit open actually helps your credit score. Use them a few times per year, pay them off promptly and watch your credit score keep rising. In general, the more available credit you have, the better.
(6) Stick to a Payment Pattern. “Steady as she goes” is the name of the game when it comes to improving your credit score. Try to maintain similar payment and spending patterns from month to month if you want to quickly improve your credit score.  A sudden spike in the amount of credit you’re using or a marked decrease in your monthly payments could have a negative effect on your score.