Having a good credit score is essential as it can affect your ability to get approved for a mortgage, a car loan or even a credit card so it is common to wonder how to increase your credit score. So, whether you are just starting your credit life or for different reasons your score has worsened, in this article we explain how to increase your credit score in Canada.
Be clear about your credit score
Before thinking about how to increase your credit score, you should be clear on what your score actually is in order to track your progress. As such, scores are updated approximately every 45 days and a high credit score is considered to be anything above 660, as in Canada scores go up to 900.
On the other hand, you should urgently consider improving your credit score if it is below 570. Thus, you can log in to Equifax to review not only your score but, over time, whether your strategies for increasing your credit score are working.
Pay on time
The most obvious but also one of the most effective tips on how to increase your credit score is to pay your debts and bills on time. This is one of the biggest contributing factors to a better credit score for Canadians. So, if you consistently pay your bills on time, it will have a positive impact. You should prioritize paying credit cards, loans and utilities. Not only will this allow increasing your credit score, but it will save you money in the long run since late fees and high interest rates will be avoided.
Unify your debts
Another of the best ways to improve credit score that you will find when looking for how to increase your credit score is debt consolidation. This involves paying off as soon as possible, usually in a period of less than six months, most of your credit debts.
Unifying your debt is helpful in obtaining a high credit score because part of the score calculation is done by dividing the total amount of credit in use by the amount available. Thus, unifying your debt allows you to reduce the interest rate and speed up the payment period, which reduces the amount of credit utilization.
If you want to quickly pay off your unified credits for increasing your credit score, we recommend you to go for an online personal loan, who will quickly give you a sum of money that can help reduce the total debt. If you have a bad credit score, we recommend Good Life Loan, who does not take this factor into account when approving a loan.
Taking out a personal loan for improving your credit score seems counterintuitive, however, getting rid of a large portion of the debts that lowered your score in the first place is one of the fastest ways you’ll find if you’re looking for how to increase your credit score.
Do not take more credits than necessary
One of the first tips you’ll be given on how to increase your credit score when you’re just starting out in your credit life is not to take on too much credit. As explained above, the amount of credit utilization can affect your credit score, especially if there is much more credit in use than you have available.
This is because lenders assume that the more credit that is being used, the less likely the individual is to be able to repay and therefore create significant financial risk. Thus, it is better to look for ways on how to get good credit rather than opening multiple lines of credit to cover one expense. Therefore, one of the best ways to improve credit scores is to keep the ratio of credit usage as low as possible, especially on open credit such as credit cards.
Check for errors in your credit score and correct them.
Unfortunately, errors on credit reports do happen and are more frequent than they should be, so it’s a good idea to be aware if this happens and correct it as soon as possible if you’re thinking about how to increase your credit score.
On platforms such as Equifax and TransUnion, you are entitled to a report of your credit report, so if you want a better credit score for Canadians, carefully review the report to ensure that the information is not only correct, but up to date.
If you find an error, the best option for improving your credit score is to directly contact the credit line managers reporting the error and request its correction as soon as possible. Also, we advise you to have all relevant documentation on hand to confirm that the information is erroneous.
It may take some time to correct errors, however, once it is done it is one of the easiest and quickest ways to improve credit score.
Keep old credits
Some people choose to close their credit cards as soon as they get rid of their credit card debt, however, when it comes to how to increase your credit score it’s a good idea to keep credit lines open even if you’re done paying off what you owe on them.
However, one of the best ways to improve credit score is to keep old credit accounts open, even if you are not using them frequently. This allows the increasing of your credit score because it is calculated by taking into account the age of your credit accounts and an old line of credit demonstrates to lenders that the individual is able to maintain and be responsible for credit for an extended period of time. However, if you are going to keep several lines of credit open, you must make timely payments or your score will continue to decline.
So, a good warning for you to be clear on how to increase your credit score is that if you don’t consider yourself capable of handling credit, it’s best to close it once you’re debt free. We hope this article will be helpful for you to understand how to increase your credit score. If you need a personal loan for the first payment impulse, we advise you to apply here to Good Life Loan. If you are looking for more information about personal finance in Canada, we recommend you to visit our blog.