Your credit score is the key to lower rates and easier credit card and loan approval. If your credit score has suffered a setback, there are some simple steps you can take right now to improve your credit score. When it’s about how to improve your credit score, how long does it take.
It varies and is determined by how poor your credit score is, to begin with. In as little as 30 days, you can see significant improvements in your credit score with the right approach. Regardless of how low your credit score is, the right strategy can boost it by 100 - 200 points in no time.
What is a Good Credit Score ?
A credit score is a three-digit number provided by credit bureaus (Equifax and TransUnion) to lenders and others evaluating your creditworthiness. Banks, mortgage lenders, insurance companies, utility companies, and, in some cases, potential employers are among them. Your credit score could be anything from poor to excellent. Credit scores in Canada range from 300 to 900 points, with the following rankings:
800 – 900: Excellent credit score
720 – 799: Very Good credit score
650 – 719: Good credit score
600 – 649: Fair credit score
300 – 599: Poor credit score
Ways To Improve Your Credit Score
Follow these simple steps to start raising your credit score today:
Inspect Your Credit Report and Score
According to the Federal Trade Commission, one out of every five people has a credit report error that affects their credit score negatively. That's a significant amount, which is why you should request your free credit report at least once a year and review it for any errors. Equifax and TransUnion, the two major credit bureaus, are required by law to provide you with one copy of your credit report each year (upon request).
Borrowell (Canada) and Credit Sesame (USA) are two companies that offer it for free on a weekly or monthly basis, along with your credit score. Because it is a "soft inquiry," checking your own credit score (and report) has no effect. Wrong personal information, inaccurate status (e.g., late payments that were made on time), hard inquiries you did not authorize, and negative information that has expired (e.g., collections, bankruptcy, open debts that have been paid in full, etc.) are all examples of errors on your credit report.
Make Payments on Time
Paying your credit card balances on time – all of the time – is the first step toward improving your credit score. An essential factor in determining your score is your payment history.
Late payments are recorded as negative information on your credit report. The longer you wait to make a payment, the worse your credit score will be. Even if you have a history of not paying your bills on time, the only way to improve your credit score is to start paying before they are due. Make your bill payments automatic, so you don't forget !
Keep a Low Balance !
Credit reporting agencies dislike a high credit balance. Your credit score suffers when you use all of your available credit. The "credit utilization ratio" is a popular metric for determining how you use credit. This ratio indicates how much of the total credit limit has been used !
As an example, suppose you have two credit cards, A and B, each with a $ credit limit. Your credit utilization ratio is calculated as follows: If you have a $ balance on Card A and $ on Card B, your credit utilization ratio is calculated as follows:
The length of your credit history influences your credit score. Even if you rarely use them now, don't cancel old credit cards in good standing. Keep these cards on hand and use them from time to time to demonstrate "activity" on your credit profile. In addition to lowering your total credit limit, cancelling old lines of credit lowers your credit utilization ratio !
Vary Your Credit
Having a variety of credit accounts, such as credit cards, installment loans, lines of credit, mortgages, and so on, can help. Your ability to effectively manage these different credit facilities sends credit bureaus a signal that you are a responsible borrower. Your credit mix influences your credit score by about 10% !
Make a Credit Shopping List
Every time you apply for credit, a hard inquiry is placed on your credit file, which lowers your credit score. If you need to shop around for recognition in several places, such as finding the best interest rate on a car loan, try to do so within two weeks. Credit reporting agencies will treat all hard inquiries placed on your file during this period as a single hit, limiting the potential impact of multiple hard questions !
A low-interest balance transfer credit card can save you thousands of dollars in interest payments if you have a large credit balance and are having trouble paying it down. The Scotiabank Value Visa Card, which charges 0.99 percent interest for 6 months, is an example of a low-interest balance transfer card in Canada. To get the most out of this strategy, plan to pay off all or a large portion of your debt during the low-interest period, which is typically 6 months !
Get a Protected Credit Card
It may be challenging to qualify for a regular credit card if your credit score is low or you have no credit history at all (for example, if you are a new immigrant or a student). A "secured" credit card requires you to deposit with the bank (such as a GIC) that secures the amount of credit you are given. If your credit card has a $2,000 limit, for example, you will need to deposit $2,000 in a designated account. A secured credit card can help you improve your credit score when you have few options. You must still pay your balance on time, and this is an excellent way to learn how to use credit responsibly !
You can also improve your credit score by adding yourself as an "authorized user" on someone else's credit account. For example, if you know someone with a good credit history, they could add you as an authorized user to their credit card. They are not required to provide you with a credit card; however, their excellent credit score will benefit you. There is still hope if your credit score isn't perfect. With the steps outlined above, you can improve your credit score by 100 or 200 points in a short time. The first step is to obtain your credit report and review it for errors. If there are any mistakes, file a dispute and have them corrected !
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