Having a high credit score is important for so many reasons – from getting approved for personal loans and mortgages to securing lower interest rates. The average credit score in Canada, according to the Government of Canada, is between 650 and 725. Even if you’re not planning to borrow money anytime soon, it’s worth taking steps to improve your credit score. Here are 10 tips and strategies to help you do just that.
1. Monitor your credit report:
It’s important to stay on top of what’s being reported about you by the three major credit bureaus: Equifax, Experian and TransUnion. Check your credit report regularly to make sure there are no errors or inaccuracies that could hurt your score.
2. Pay bills on time:
This is obvious, but it’s one of the most important factors in determining your credit score. Even if you only pay the minimum amount due, make sure you’re paying on time. Set up automatic payments, if possible, to ensure that bills are paid on time each month.
3. Keep credit card balances low:
Ideally, your balance should always be below 30% of the total credit limit. This helps demonstrate that you can manage debt responsibly and can have a positive impact on your credit score. If you find your credit card debt getting out of control, look into a credit card refinancing loan that has a lower interest rate. This can reduce the amount of interest you pay and get you out of debt sooner.
4. Don’t close old accounts:
Closing dormant accounts can decrease your total available credit and potentially harm your credit standing. If you have no intention of utilizing the account, it’s advisable to keep it open but inactive. This approach will contribute to maintaining a higher credit score.
5. Take out small loans:
Taking out a small loan (think of something like a personal loan) and paying it off in full and on time will demonstrate that you are responsible with debt and could improve your credit score. Be sure to shop around for the best rates before taking out any personal loan.
6. Get added as an authorized user on someone else’s account:
Request a trusted family member or friend to add you as an authorized user on one of their established accounts. This strategy can positively impact your credit score since the account’s history will be incorporated into your own.
7. Dispute negative items:
If there are errors on your credit report, dispute them immediately and make sure they get corrected. Negative marks stay on a credit report for seven years, so it’s important to get them taken care of quickly.
8. Don’t apply for too much credit:
Be mindful of the number of credit applications you submit, whether for personal loans or credit cards, as each application generates an inquiry on your credit report. Excessive inquiries can potentially have a negative impact on your credit score over time.
9. Keep revolving debt low:
Credit utilization, or the ratio between debt and available credit, is an important factor in determining your score. Keeping your revolving debt low – at least below 30% of the total available balance – can help improve your score over time.
10. Sign up for a credit monitoring service:
As we’ve already discussed, it’s important to stay on top of what’s being reported about you and a credit monitoring service provides real-time alerts about activity on your accounts and allows you to dispute any inaccuracies quickly.
Improving your credit score takes time but it is possible by having a plan and staying organized. Following these 10 tips and strategies will help you get on the path to better credit health. Don’t forget to keep an eye on your credit report and stay up to date with any changes that could affect your score.
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