A credit score is a 3-digit rating that represents your credit behavior, specifically your total levels of debt and repayment history. It is used to assess your creditworthiness, as a credit report is generated when you wish to borrow money from financial institutions.
In Canada, credit scores range from 300 to 900, with the former indicating a bad credit position and the latter, an excellent position. With a good credit score, you’ll get approved for almost all credit products and at fair interest rates.
Here are some proactive steps you can take to improve and manage a positive credit score in Canada;
1. Monitor Your Credit Report and Score
At least 1 in 5 consumers have errors in their credit report. These impact their credit score negatively. You should evaluate your monthly credit card expenses by requesting your credit report monthly.
This way, you may increase your chances of identifying and correcting errors like inaccurate personal information, authorization errors, or omitted transactions. Two major credit bureaus, Equifax and TransUnion, are required by law to provide you with one copy of your credit report upon request.
2. Review Your Payment History
Your payment history is a vital factor for your score. For this reason, work towards settling your payments on time, as late payments register on your credit as negative information and damage your credit score.
It is best not to skip a payment even if a bill is in dispute
3. Get Electronic Alerts from Your Financial Institution
At your request, your financial institution may send you an electronic alert when the credit available on your credit card falls below a certain amount.
4. Use credit wisely
If you have a $5,000 limit credit card, try not to exceed that limit. Borrowing more than the authorized limit on a credit card can lower your credit score. Lenders may be reluctant to lend to you if you frequently exhaust your available credit and have a track record of late payments.
5. Get a Secured Credit Card
If your score is poor or you do not have a credit history as a new immigrant or international student, qualifying for a regular credit card may be more challenging. That’s where a secured credit card comes to the rescue.
You are to deposit an amount with the bank that secures the credit value extended to you. So, if your credit card has a $2,000 limit, deposit $2,000 in a designated account.
Why choose a secured credit card? It helps you to build your score when there are limited options. You will still need to pay your balance promptly. However, it’s one way to learn how to use credit responsibly.
6. Use different types of credit facility
Your score may be lower if you only have one type of credit product, such as a credit card. It helps to have a mix of credit accounts like credit cards, installment loans, lines of credit, and mortgages. A combination of credit products may improve your credit score significantly.
However, ensure you only borrow an amount you can repay, or you could dampen your credit score invariably.
FINAL THOUGHTS:
Lowering your credit usage and raising your credit score is possible if you begin today. Start with the decision and stay disciplined with credit, then watch and see how your finances will improve for good!
