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9 Steps to Improving Your Credit Score Quickly in Canada

April 4, 2018    Credit Score

9 Steps to Improving Your Credit Score Quickly in Canada

Need to buy a bigger car to make room for a new bundle of joy in nine months, but can’t get a loan because of your poor credit? Don’t worry — it’s entirely possible to improve your credit score in a relatively short period of time. Since the factors affecting credit score ranges are within your control, you have the power to improve your situation. Unfortunately, it will take some work on your end.

A question that always tends to rear its head is “how do I quickly improve my credit score by several hundred points?” While you can’t increase your credit score tomorrow, it is possible to turn your credit around in a relatively short amount of time — usually give or take one year depending on the health of a person’s current score. Showing you can be diligent about your spending and debt repayments will go a long way in convincing lenders you are a low-risk customer.

Before you do anything – Request a copy of your credit report

You can get free credit reports from the two largest credit bureaus in the country, Equifax Canada and TransUnion Canada. Simply send in some basic information and wait two to three weeks for your report to arrive in the mail. You can also access it immediately online from both companies for a small fee.

Your three-digit credit score is the most important number in your report because it gives you a picture of the overall health of your credit. Your report includes a lot of additional details about specific accounts, which can be overwhelming to sift through if you’re not sure what you’re looking for. The Government of Canada has a great online explainer and sample credit reports so you can figure out those other numbers (and sometimes letters) mean.

Improving Your Credit Score:

Here we’ll discuss the different steps you can take to improve your credit score, so you can get financing for your ideal vehicle as quickly as possible.

How to Improve Your Credit Score in 9 Steps:

  1. Leave old debts on your credit report.
  2. Correct errors in your credit report.
  3. Increase your credit limit.
  4. Pay your bills on time.
  5. Set up automatic payments.
  6. Use your credit more.
  7. Open a secured credit card account.
  8. Keep a low credit card account.
  9. Monitor and request a copy of your credit score.

Leave old debts on your credit report

You can’t improve your score if you don’t have any credit to begin with. Young people and new Canadians often run into this problem because they are just starting to establish themselves financially.

It’s a good idea to keep old credit accounts open because the longer your history of using credit responsibly, the better. Having an old debt that was paid off as agreed can be a boost for your overall credit score.

Correct errors in your credit report

It’s a good idea to check your reports at least once a year to make sure all of your information is right. If you notice any errors or incorrect information, contact the credit bureaus and ask for a correction. Errors could include someone else’s information in your file, debts listed that aren’t yours, debts that have been paid in full and incorrect payment history.

Increase your credit limit

A lot of folks think that Increasing your credit limit just means giving yourself the opportunity to spend beyond your means. But, not necessarily. Increasing your credit limit can have a number of upsides if you manage your credit wisely, but mainly it will lower your overall credit utilization and increase your score provided you keep your utilization low and make your payments on time.

Pay your bills on time

Punctuality is key, as they say — in life and in credit repair. Your payment history accounts for roughly 35% of your credit score. If you are regularly making late payments on your credit cards or student loans, your score is going to take a big hit.

Set up automatic payments

If your credit score is suffering due to past missed or late payments, you should consider setting up automatic payments for those debts that have fixed payments. This includes, but is not limited to student loans, personal loans, mortgages and car loans. This way you’ll never forget to pay a bill again, which can seriously hurt your credit score.

Use your credit more

This tip might seem counterintuitive, but one of the best ways to repair your credit score is to use your credit more often. Credit is built on your ability to use credit and pay it back responsibly, which shows you are able to manage your finances. Continue using your credit as long as you are able to repay it on time.

Open a secured credit card account

One way to build your credit history is by opening a secured credit card account. This kind of account require a deposit upfront, but can be used like a regular credit card. A secured card is good for someone with no credit history or a poor credit score who may have a harder time getting approved for a credit card or a loan.

Keep a low credit card balance

Keeping a high balance on your credit cards is not good practice. Maxing out your credit cards month-after-month and not paying them off can affect your score because credit bureaus compare how much credit you use to the amount of credit you have available. As a rule of thumb, it’s a good idea to keep your credit to less than 30% of your available credit. For example, if your card has a credit limit of $2,500 you should only be using $750 of that each month.

Monitor and request a copy of your credit score

You can get free credit reports from the two largest credit bureaus in the country, Equifax Canada and TransUnion Canada. Simply send in some basic information and wait two to three weeks for your report to arrive in the mail. You can also get access it immediately online from both companies for a small fee.

Your three-digit credit score is the most important number in your report because it gives you a picture of the overall health of your credit. Your report includes a lot of additional details about specific accounts, which can be overwhelming to sift through if you’re not sure what you’re looking for. The Government of Canada has a great online explainer and sample credit reports so you can figure out those other numbers (and sometimes letters) mean.

The bottom line

Having a good understanding of your credit situation will give you a leg up when it comes to improving your credit score. It can also help ease the stress of applying for auto financing — even if you have a low credit score. At Birchwood Credit Solutions we understand that everyone’s financial situation is different and we do our best to find a car loan that best suits you and your credit. Get in touch with one of our trusted advisors today.

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