Do you know your credit score? Whether you’re on the lookout for a home or you’re upgrading in the near future, this three digit number can be the difference between getting approved or getting denied a mortgage. Credit scores range from 300-900, and the higher the number, the lower your interest rate, and the greater the chance that your mortgage gets approved.

But your credit score doesn’t come out of thin air. The number represents the odds that a lender will get the money back that they lend you, and the higher the number, the better the odds. If someone’s score is 580, it means that “580 people out of 850 are likely to repay their debt.” If someone’s score is 780, it means that “780 people out of 850 are likely to repay their debt.” But your credit score isn’t set in stone. Here are some ways you can boost your numbers.

#1 Know Your Position

Before you begin working on raising your credit score, it’s important to know where your credit stands.

While you do have the option of getting a free credit report (you’ll have to fill out a letter and send it by mail along with two pieces of ID), this doesn’t necessarily mean you’ll get your credit score. Credit reports are different from credit scores. Credit reports include information such as when you opened a loan or line of credit and whether or not you pay your bills on time, while your credit score is the three digit number that is calculated using your credit card report. To calculate your credit score, lenders use 5 factors: your payment history, how much you owe, your length of credit history, new credit applications, and the types of credit you use. 

Most lenders will want to see your credit score. In Canada, you can get your credit report and credit score from Equifax Canada and Transunion Canada for a small fee. When it comes to checking your credit, it’s best to do it once a year. If you notice any inconsistencies on your credit report, follow up on them as soon as possible so that lenders can accurately assess your credit score.

Most people believe that inquiring about your score will lower your numbers, but this isn’t always the case. According to Transunion Canada, “certain inquiries (your inquiry to your file and account review inquiries) have absolutely no impact.” That being said, avoid checking your credit constantly during a short period of time. Lenders may get cautious and see this as an attempt to open multiple credit card amounts to decrease your debt.  

#2 Play the Long Game

Improving your credit score is less of a sprint and more of a marathon. While you may be tempted to work with a company that offers a quick fix to your credit score, these bureaus don’t have any secret tricks up their sleeves. By law, any third party cannot alter any information that is correct on your report. If you’re on the lower end of the credit score spectrum, understand that it’s not the end of the world. By simply paying your bills on time and building your credit history, you'll raise your credit score slowly but surely.

#3 Start Building Your Credit History Yesterday

As the Chinese proverb goes, “The best time to plant a tree was 20 years ago. The second best time is now.” Building your credit score might sound complicated, but if you make a habit of tracking your spending and paying your bills on time, you will avoid the headache that comes with being denied a loan. Before you start getting those big-ticket items in your life like a house or a car, use your credit card for everyday purchases (gas, groceries, etc.) and make sure paying them off is your top priority. When you do this consistently, you’ll notice your credit score beginning to rise.

#4 Paid in Full

Pay your debts off as soon as possible. Lingering debts can quickly add up and can snowball later down the line. Paying your debts in full may not be an option, but you should be paying off as much as you can without sacrificing your quality of life. If you're unable to make your payments, call your lender and ask them if you can create a customized plan to pay back your debt. If you're not doing so already, set up an automatic payment plan at your bank, and remove any possibility of forgetting to pay those bills!

#5 Don't Max it Out

Credit cards can make or break your credit score. While there’s nothing wrong with having one, carrying a large balance for a long period of time is one of the quickest ways to lower your credit score. If you don’t have a credit card, consider signing up for one and start building your credit history. Once you get your card, try not to max it out. Having a high balance-to-credit ratio (the money you owe vs. the maximum amount you can have from the lender) means you’ll hurt your credit score. A good rule of thumb is to have 50% or less owed at any given time.

Do you have another tip for boosting your credit that I didn’t mention? Feel free to let me know on my Facebook and Twitter pages or in the comments section down below.

Posted by Chris Proctor on


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