Many Canadians don’t realize how important their credit reports and credit scores really are.
How good your credit history and score is can determine whether you are eligible for everything from a credit card to a mortgage. A low credit score can also have a big effect on your day-to-day life by increasing the overall cost of a loan, and even making it more difficult for you to rent an apartment or purchase a cell phone.
Unfortunately, there is no single or fast way to improve one’s credit rating. Only you can improve your credit rating by modifying the way you manage your money. However, there are steps you can take right away to get started.
If you want to improve your credit rating, the first thing you should do is to request a copy of your credit report and score from all three of Canada’s credit-reporting agencies (Equifax, TransUnion and Northern Credit Bureaus) to make sure that the financial portrait they have of you is accurate.
Once you know the information contained in your credit report is accurate, you should take a closer look at your credit score and understand the factors that contribute to your individual credit rating. The main factors that influence your credit report and credit score are:
- your payment history
- any collection or bankruptcy recorded against you
- your outstanding debts
- your account history
- the type of credit you use
Make sure you read the information provided to you by the credit-reporting agencies about the factors responsible for bringing your score down. If you take their advice into consideration and implement their suggestions, you may be able to improve your score.
Here are some tips to help you improve your credit score:
- Always pay your bills on time. Although the payment of your utility bills – such as phone, cable and electricity – is not recorded in your credit report, some cellular phone companies may report late payments to the credit-reporting agencies, which could have a negative effect on your credit score.
- Try to pay your bills in full, by the due date. If you aren’t able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
- Try to pay your debts as quickly as possible.
- Don’t go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the greater the impact on your credit score.
- Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
- Try to re-establish your credit rating by applying for a “secured credit card”. A secured card is a card that you obtain by depositing a sum of money with the credit card issuer. Your credit limit is usually a percentage of the amount you deposit. You can build a credit history by making all of your secured credit card payments on time.
- Make sure you have a credit history. You may have a low score if you don’t have any record of owing money and paying it back. You can build a credit history by using a credit card.
You should order and review your credit report once a year from all three credit-reporting agencies because they do not collect the same information. You can get more information on how to obtain your credit report and score from the Financial Consumer Agency of Canada (FCAC), a federal government agency that protects consumers’ rights and provides them with information about financial products and services. FCAC publishes a booklet called Understanding your Credit Report and Credit Score. To view or download this publication, visit FCAC’s Web site at: moneytools.ca. Print versions are also available to the public free of charge by calling FCAC toll-free: 1-866-461-3222 (toll-free TTY number: 1-866-914-6097). – (NC)