With some time, and taking the right steps, your credit score can improve. According to Latoya Irby, a credit expert, “Getting rid of the negative credit report information and catching up on past due bills is the best way to start rebuilding bad credit.”
Moreover, of course, we all want a good credit score, once this allows applying for cards, loans and other credit with confidence. Credit history is built up slowly over time as you increase the number of on-time payments you make and, the most recent information on your file will have the most impact when lenders start the search for your credit details.
In Canada, your credit scores generally scope from 300 to 900. The higher the score, the better. However, many different things can hurt your credit, such as late or missed payments, high credit card balances, too many applications, and so on. Also, you should beware of third-party companies that claim they can quickly boost your scores, once only your creditors can alter the information on your credit file. On this long road trip, there are no shortcuts.
Getgoing.ca wants to help you to end your bad credit, and for that, we have created this guide that you must start following now.
1. Pay bills on time
This advice may seem easy and obvious, but most of the consumers don’t realize how important it is to pay their bills on time. First of all, we aren’t talking just of credit cards; even simple things like your cell phone bill matters.
Heather Battison, vice president of TransUnion Canada, explains how important this step is: “The most important factor for building and maintaining your scores is to pay your bills on time and in full each month. This activity demonstrates your ability to manage credit responsibly and can positively impact your credit scores.”
2. Keep old debt on your report
Contrary to what it may seem, is not wrong to have old debt on your report.
“Arguing to get old accounts off your credit report just because you paid them is a bad idea,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax.
Actually, the longer you’ve had credit, the better it is for your credit score.
Moreover, good debt — debt that you’ve handled well and paid as agreed — is positive for your credit. The longer your history of good debt is, the better it is for your score. “Leave your oldest accounts open since they help increase your credit age and build good confidence. Closing the mind won’t remove it from your credit report immediately”, recommends TheBalance.com.
3. Minimize your credit utilization
Your credit utilization is how much of your available credit you use, expressed as a percentage. The less available credit you use, the better it is for your score. According to Debt.Org, your credit utilization makes up 30% of your credit score and is often the most overlooked method of improving it.
The damage to your score starts when your utilization rate goes over 30%. According to Bill Fays, a finances’ veteran: “If you spend $500 a month with the same card, your credit utilization soars to 50%. That is an indication to credit agencies that you are taking on more debt than you can afford, thus your credit score drops”.
Everything depends on your circumstances, but “cutting spending is the most sensible choice.”
4. Resist Hard Credit Inquiries
The number of recent credit applications you’ve made is called “hard inquiries.” Avoid making credit inquiries on your credit report on a regular basis. Hard credit checks, like when you want to increase a credit limit or apply for a credit product or loan, always affect your credit score.
According to GreedyRates, each time you apply for a credit card, the card issuer will make a hard inquiry on your credit report. Such a pull can take approximately 10 points off your score. Nothing major, but enough of these can do damage to an otherwise stable credit score.