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7 Ways to Improve Your Credit Score

By HUB SmartCoverage Team on February 4th, 2020

Did you know that one in five consumers have errors on their credit report?

Those mistakes negatively impact their credit score. That’s why it’s worth annually requesting your free credit report from one of Canada’s two major credit bureaus: Equifax Canada and TransUnion Canada. By law, they’re required to provide you with one copy per year. When you check your report, it is considered a “soft check” and does not impact your score.

RELATED READING: How to order your credit report and score

Errors on your report could include the wrong personal information, inaccurate status – late payments that were made on time, negative information that has expired, including collections, bankruptcy, open debts paid in full and so on. You can dispute any errors and ask they be removed. The credit bureaus will investigate and have 30 days to respond, but it can sometimes take months to sort out.

In Canada, the credit scoring system ranges from 300 – 850, with the average person having a score of 650. Good credit is the foundation of being able to secure further credit – such as a mortgage - at better interest rates. If yours is not stellar, the following 7 ways will help you improve it:

  1. Just pay it on time – This is a biggie. In order to improve your score, you must pay all your credit card bills on time -every time. Payment history is one of the biggest factors in your score’s ranking. Any late payments register on your payments as negative. The later the payment, the more damage. The best way to tackle this is to schedule automatic payments before they are due. You should leave at least a three-day window for payment processing.
  2. Keep a low balance:Not surprisingly, credit reporting agencies dislike a high credit balance. So, when you max out your credit, it hurts your score. Something called a “credit utilization ratio” measures how much the total available credit to you is being used. Aim to keep that ration below 30 per cent. One way to accomplish this is if you pay down you balances more often since credit card issuers report your balance to the bureaus once month.
  3. Keep old credit alive - Think twice about closing an old account you don’t use anymore. Having a 10-year-old account actually helps you demonstrate a credit history. You many even want to use them now and then to show some activity on your credit profile.
  4. Steer clear of retail cards –The next time you think of applying for a retail card, remember that each separate credit card application inquiry results in a ‘hard check’ that lowers your credit score by seven points. To put that in perspective, that could mean the difference between getting the best mortgage lending rate or a much higher “B-lender” rate.
  5. Vary credit -A variety of credit accounts - credit cards, installment loans, lines of credit or a mortgage – shows your ability to manage them. It signals credit bureaus that you are a good borrower. The mix of credit you have affects your credit score by about 10 per cent.
  6. Plan credit shopping –Every time you apply for credit, a “hard” inquiry is placed on you file. This results in a drop in your score. So, if you are shopping around for the best car loan or mortgage rate, do it all within a two-week period. Why? Because the credit reporting agencies will consider all these inquiries as one hit.
  7. Consolidate debt -If you have a significant credit balance and find it difficult to keep up with paying it down, a low-interest balance transfer credit card can save you thousands in interest payments. But you should plan to pay all or a significant portion of the debt during the low-interest period.
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