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Seven Steps to a Higher Credit Score

HOW-TO Author: Steve Dyment

Eventually in life you will come to a point where you need to borrow money. Whether it’s for a new home, car or something else, your credit score will have big impact on whether you get a great rate, a shabby deal or are flat out declined. As a mortgage broker, sometimes I am amazed at how many people aren’t aware of their credit score and are then dismayed to find out that it is lower than it should be.

As you can see, your credit score matters. But so many Canadians don't have a clue about their credit score despite it's huge potential impact on their monthly cash flow. Therefore, I have outlined seven steps that will help improve your credit score. With a little bit of discipline, you will be getting preferred rates in no time.

1. Pay your bills on time

Make it automatic by inputting your payment due dates into your phone or computer as a recurring monthly reminder. Try a week earlier than the actual due date. That way if you are in an unexpected financial pinch, you have a few days to figure out how to make the payment.

2. Know your credit score 

There are two national credit agencies in Canada: Equifax and TransUnion. As a Canadian, you can have your credit report sent to you for free from either one. Also, for an additional twenty bucks they will include your credit score as well. Scores can range anywhere from 300 - 900 but typically you want your score to be 680 and above in order to get the best rates. Furthermore, do take the time to read and understand the info contained on your credit report.  If you've been putting this off for a while, let 2011 be the year that you get a handle on your credit score.

3. Don't gorge yourself on credit

Do you get tempted by those low interest credit card offers in the mail? Do you feel compelled to lease that car, buy that cell phone and get that new credit card all in the same month? Don’t. Applying for too much credit in the same period of time is a danger sign to the credit bureaus and will negatively impact your credit score. Also, avoid getting pre-approved for your new mortgage by multiple lenders as each one will have to pull your credit, thereby lowering your score unnecessarily. Consider using a mortgage broker who can access several different lenders on your behalf and get you great rates but only has to check your credit once.

4. Don't avoid credit either

The opposite to number three is also discouraged. Occasionally, I run into individuals who despite being in the workforce for a few decades, don’t have any credit history as all finances were handled by their spouse. Even if it’s just a few simple types of credit (cell phone, secured credit card or low interest loan), it’s a good idea to have a positive track record of repayments. It will surely come in handy when you finally do need it.

5. Keep your debt-to-credit ratio in line 

Credit bureaus pay particular attention to your debt to credit ratio so as much as you can, keep your balances low. Furthermore, try not to max out any of your credit cards or worse, go over your limit as it will reflect poorly on your credit score.

6. Stay away from department store credit cards

Resist that ‘$20-off-your-next-purchase-if-you-sign-up-right-now’ offer. In the long run, store credit cards aren’t a great deal. Not only can the interest rates be as high as 29% but the actual type of credit you have matters and these type of cards may negatively affect your score.

7. Don't close unused cards

Unless there is a compelling reason to do so, keep your existing credit lines open. This means if you have a credit card that you no longer use, consider cutting up the card but keeping the account open with no balance. Again, this favorably reflects back on your debt to credit ratio as well as the length of time your account has been opened.

These seven steps, if practiced, can have a big impact on your credit score. And since your credit is something that you will need throughout your life, it pays to keep it in good standing. If you have any questions about these steps or would like to know more credit boosting tips, please don’t hesitate to contact me.

Contact Information | Creative Mortgage Corp.
Name:	Steve Dyment
Company:	Creative Mortgage Corp.
City:	Kelowna
Province:	British Columbia
Country:	Canada
Phone:	(250) 470 9154
Email:	Email
Website:	http://www.creativemortgage.ca