Top 5 ways to improve your credit score

With tightening lending regulations and a newfound degree of uncertainty surrounding the fallout from COVID-19, having a good credit score is more important than ever. This is especially true if you hope to buy a home in the near future.

What is a credit score exactly? It’s a number lenders use to help determine how likely it is a person will repay a credit card balance or loan. This figure is a critical part of anyone’s lending profile and overall financial well-being. Credit scores range from 300 to 900. The higher your score the more likely you are to qualify for financial products, such as credit cards, lines of credit, and mortgages, as well as favourable interest rates.

The average credit score in Canada is around 650, which also happens to be the minimum score needed to qualify for most financial products. But life doesn’t always go according to plan, and so many Canadians struggle with their credit rating based on past financial missteps. If your current credit score is lagging now’s the time to take action. Improving your credit can be a slow process but there are concrete steps that can be taken to expedite its improvement.

Here are the top five ways to maintain and improve your credit score.

1. Check your credit score and thoroughly review your credit report: Knowing your credit score is the first step in taking ownership of where you stand. Through a report from a consumer credit reporting agency, such as Equifax or TransUnion, you will learn your current score and can verify that there’s nothing suspicious on your creditreport, like credit cards or loans you weren’t aware of.
2. Make your bill payments on-time: If you’re unable to pay your bills in full by their due dates, it’s critical to at least make the minimum payments. If you don’t, missed payments will negatively impact your credit score. If you’re having trouble making payments, reach out to the creditor before the situation escalates to try and make arrangements. Be proactive; ignoring the problem will only make it worse.
3. Use acredit card, responsibly: That means never going over the credit limit, and trying to keep your credit card bills as low as possible. Using your credit card within reason, and paying your bill on time at the end of the billing cycle – ideally in full – is the easiest way to build good credit.
4. In debt? Take action: If you’re stuck struggling with debt, it’s important to address the situation with the right professionals. Consult with a financial professional about how to make payments to reduce interest while preserving your Failing to have a realistic financial plan can result in debt problems becoming exponentially worse, allowing interest charges to pile up, and hampering your credit score further.
5. Have a plan and spend less: Conduct a review of your spending over the last few months to determine what your budget is based on your fixed and lifestyle expenses. This process is also a good opportunity to identify reckless spending, and try to minimize it moving forward. In addition to sticking to a budget, part of spending responsibly means not use a huge percentage of thecredit available to you. Experts recommend never spending more than 50% to be exact. So if your credit card limit is $4,000, try not to use more than $2,000 of it in any given month. This type of controlled use shows lenders that you’re capable of using credit responsibly, never spending more than you’re able to repay.

If you’re concerned about your credit score and how it might impact your ability to qualify for a mortgage, or would like to discuss your individual lending profile, Orbis Mortgage brokers are available to help you determine the best path forward towards home ownership. Call us today to get started.