Four Valuable Tips on How You Can Improve Your Credit Score And Why it Matters.
We all need to borrow money at some time, whether it’s for a major expense such as a house purchase or a new car, or something more modest. When you apply for a loan, your credit score is assessed every time to see if you’re suitable.
If your credit score isn’t great, the amount you can borrow may be reduced and the interest you’re charged may be greater. If it’s really bad, you may not get a loan at all and the same applies if you want a credit card. It’s really important, therefore, that your credit score is as good as it can be, so we’ll give you a few tips on how to improve it.
The credit score you have can improve reasonably quickly if you go about it the right way. However, it’s not something you’re going to achieve overnight — around a year is realistic to get it in really good shape, although you can make some improvements much quicker than that.
Obtain and Check Your Credit Score
If you’ve never seen your credit report, you’ll have no idea what your credit score is and so won’t know how potential lenders view you. The two biggest credit bureaus are Equifax Canada and TransUnion Canada, and you can get a free copy of your report through the mail from either of them by supplying some basic information. This may take a few weeks and you can get a copy online immediately, for a small fee, if you need it quicker.
Once you get your report, check it thoroughly for problems and to make sure it’s correct. If you do find any errors that reflect badly on you, get them corrected without delay. You can do this by contacting the credit bureau and explaining the situation although, if you want it done quicker, the creditor that caused the error may be a better option.
If you see any old outstanding bills on your report, get them paid without delay. No matter if they’re only for a small amount, they’ll still damage your credit score, so make sure they’re paid and removed from the report. The overall aim is to tidy the credit report and remove anything that’s damaging.
The credit score shown on the report is the one that all lenders look at and, the higher it is, the better your prospects of getting a loan or credit card at a good rate of interest. Your aim is to get this score as high as possible.
Establish a Good Credit History
Anyone who’s never borrowed money or had a credit card will have no credit history. That means a lender won’t have a score to look at when deciding whether to lend money. In this situation, you need to create a good credit history without delay.
The best way to do this is to borrow money, have some sort of debt or have a credit card and make sure all payments are made on time. Late and outstanding payments must be avoided as these damage your credit score (around 35% of your score is based on your credit history).
If you’re in a position where you can’t get a credit card or loan, a secured credit card might be the answer. To obtain one, you’ll need to make an initial deposit but can then use it like a normal credit card. The more you use credit, the more of a credit history you’ll build up and potential lenders will be better able to see how you perform. So make sure you perform well by always paying on time.
Stay Within Your Limits
The aim is never to go overdrawn on your bank account, never to have overdue payments and to stay within your credit card limit. To do that, it’s best to budget your income and spending, so you know your future prospects, and then make sure you don’t overspend.
As regards keeping within your credit card limit, the lower the better is recommended. As a general rule, never go above 70% of your credit limit, so you always have something in hand. Keeping it to about 30-35% of your limit is even better because it shows you’re financially responsible and will help your credit score.
Limit Your Credit Applications
Credit enquiries account for around 10% of your credit score. So, each time you apply for credit or check credit availability and rates, this will count against you and lower your credit score. It’s best, therefore, to limit your credit enquiries.
Having said that, since these enquiries account for a relatively small proportion of your overall score, they’re not the most important item of concern. It’s better to look around and get a good loan interest rate rather than accepting the first offer because you’re worried about your score.
Ensuring Your Credit Score Remains Good
Once you’ve improved your credit score, make sure you keep it at a high level. It’s all about being sensible, living within your means and paying attention to detail.
When you know your score and understand how it’s affected, that’s a lot simpler. And having a good credit score will mean that loans and credit cards are easier to obtain and more affordable.
If you have a lot of questions or concerns about your credit score, or are unsure how ot obtain one, contact us at House of Cars or simply drop by. We’ll be happy to pull your credit report for free and go over it in detail with you as well as help you put together a long term plan for credit score improvment.