How To Increase Your Credit Score

In Canada, the credit score system reveals how diligent a person is managing their debts. The management of debts generates a person’s credit score, which is a three-digit number that can summarize the information within a credit report. Creditors use the credit history of a customer to determine whether or not they are eligible for obtaining a loan, including mortgages. Furthermore, credit score history is also used by homeowners when tenants are renting an apartment.

Maintaining a good credit score has a significant impact on the financial future of a person. There are several factors that can have an impact on a person’s credit score, and they are paying bills on time, credit utilization, age of credit accounts and recent credit inquiries. By having a higher credit score, it demonstrates to a lender that the borrower is able to pay back debts on time. Having a good credit score also qualifies the person for loans, credit cards, mortgages, and other financial products. Furthermore, an individual can also take advantage of lower interest rates on loans by having a higher credit score.

There are several methods through which an individual can utilize to increase their overall credit score and reap the benefits. Some of the methods are as follows:

Never Go Over Limit

When using a credit card or line of credit it is advisable to ensure that the credit does not go over the limit of a credit.  This can happen unknowingly because of interest charges included with purchases so it’s important to monitor your credit card balances

Pay Bills On Time

To maintain a good credit score, it is imperative to pay all bills on time especially credit card bills and loans. This will allow to maintain a good history of payments and having a late or missed payment will cause the credit score to decrease. To ensure that all bills are paid on time, users can use the feature of automatic billing which is available from all major banks in Canada.

Apply for New Credit Only When Needed

Before applying for a new credit, it is essential to consider whether the new credit is actually required or not. This is because having multiple credit application within a short period of time negatively impacts the credit score.

Take an Offer to Raise Credit Limit

Accepting offers to increase the credit limit can increase the chance of having a good credit sore, albeit seeming counterintuitive. This will ensure that the credit limit is not exceed if the spending pattern of a person is the same as before. Furthermore, it would assist in decreasing the utilization of credit. However, the person must be careful in using the extra credit in a responsible manner as it could be tempting to spend extra cash available with the extra limit.

Diversifying Credit Mix

Credit mix is also an important factor which can affect the overall credit history of a person. Credit mix is referred to as the types of credit accounts that is opened by a person. Lenders and creditors prefer individuals who have a diverse credit mix as this ensure that the individual is able to manage different types of credit accounts in a responsible manner. There are four types of credit accounts that can be used to diversify credit mix. These are revolving credit, installment credit, open status credit, and mortgage loans.