These days, whether you’re applying for an apartment or buying a new car, having great credit will save you a lot of money. A low credit score will cost you in interest and fees. It may even prevent you from getting the home or job you want. If you’re looking to get the highest credit score possible, you’ve come to the right place.
On average, credit scores were up in Canada over the past year. This is a good sign that people are saving more and spending less. Those with poor credit scores, however, will pay the price. To help you boost your credit score we’ve rounded up everything you need to know about raising your score.
What is a Credit Score?
A credit score is a number assigned to your creditworthiness. This number is used for everything from your mortgage to getting a job. When you open a credit card, make payments on time, or buy a car, all this information gets reported on your credit report.
When a lender goes to look at your credit score, they’re looking to see how responsible you are with your credit. A high score tells a lender that you make payments on time and have a responsible amount of debt. A low score shows a lender that you’ve had a high amount of debt or you’ve missed a lot of payments.
Your credit score will affect everything from interest rates and loan terms to your ability to get an apartment. Your credit score factors into your car loans, mortgage, job applications, and more.
Credit Score Ranges in Canada
A credit score in Canada can range from 300 to 900. It’s important to note that each lender will have its own criteria for what a good credit score is. Here is a breakdown of scores according to Equifax for reference.
- A score of 760 to 900 is an excellent credit score
- A score of 735 to 759 is very good
- A score of 660 to 724 is considered good
- A score of 560 to 659 is fair
- A score of 300-559 is poor
Creating a Budget
When it comes to boosting your credit score, creating a budget is key. A budget is the best way to keep track of what’s coming in and what’s going out. A budget is like a road map to fixing your credit and boosting your score.
To start creating your budget, write down everything that you have coming in as income. Any wages and tips should go into your budget. Next, write down all your expenses. You’ll want to start with fixed expenses that must stay within your budget.
A student loan or car payment are examples of fixed expenses. Music subscription services and group fitness classes are examples of expenses that you can cut if needed. What you have left is what you’re able to save each month. In some cases, this number may even be negative.
If you’re spending more than you’re taking in, it’s time to make some cuts. To make up the difference you may find yourself using credit cards or missing bill payments. This is going to have a negative effect on your credit score. A loan may also help you pay off some debt and get you back on track.
Tips for Saving Money
Boosting your score starts with saving more money. The more money you save, the more you’ll be able to put towards your debt. Saving money also means not using your credit cards when you don’t have enough disposable income available.
To help you save money, make saving automatic. Most banks allow you to transfer money from your checking account to your savings account automatically. The best part about this service is that it’s done automatically. The money is out of sight and out of mind.
If there’s anything in your budget you can cut, this will also create more room in your budget for saving. Before doing your budget, you may not even realize you’re paying for three different music services you aren’t using.
Making some cuts from your monthly spending will also free up money to help you pay more off your credit card. Too high of a credit card balance is also costing you a lot of money in interest. Cutting back helps to save all around.
Paying Down Your Debt
Paying down your debt is one of the best ways to boost your credit score. Too much debt shows lenders and creditors that you may spend more than your means. How much debt you have in relation to how much credit you have weighs heavily on your score.
Ideally, you want as little debt as possible. Let’s say you have a credit limit of $5,000. If your credit card bill is up to $4,500, you have a high level of debt in relation to your available credit. A credit card bill of $100 shows you’re using very little of your available credit.
Having low credit usage is one of the best ways to increase your credit score. Instead of closing your accounts, keep your cards open and use them sparingly to keep this ratio low. Closing too many accounts doesn’t actually increase your score.
The next best thing you can do for your credit score is to pay down more of your debts. Start with your smallest debts first. If you’re having trouble coming up with the money to pay off your debt, we have loan options that can help get you out of the cycle of debt.
Making Your Payments on Time
Another factor that goes into calculating your credit is how you pay your bills. Making your payments on time will help to boost your score. The longer history you have of on-time payments the better.
The length of your credit history is another major component to calculating your score. When you have an account that’s been open for several years with on-time payments, your credit score will go up. To help boost your score, keep your accounts open and keep up with your payments.
Don’t Open New Credit
New lines of credit can have a negative impact on your score. If you go on a spending spree and open four different store credit cards in a short amount of time, the credit reporting agencies will be notified. This could be a signal of reckless spending.
Applying for a mortgage and a car several years apart won’t negatively affect your credit. It’s too many new accounts in a short amount of time that will lower your score.
Checking your own score, however, doesn’t affect your credit. You can see your own score as often as you’d like without a negative effect on your score.
How is your Credit Score Calculated?
Equifax and TransUnion are the two main credit bureaus in Canada. Your payment record, your credit utilization ratio, and your credit history all factor into how your score is calculated. Negative reports, thankfully won’t stay on your credit report forever.
Inquires, late payments, missed payments, and even bankruptcies will eventually fall off your report. The longer credit history you have, the more negatives fall off your credit and the more history you have of making payments on time.
Each of these factors will weigh on how your score is calculated. It’s important to stay on top of payments and pay down your debts to achieve an excellent credit score.
Checking Your Report
Through the two credit reporting agencies, you’re able to download your report for free or pay for more frequent and in-depth downloads. Neither option negatively affects your credit score. One of the best ways to boost your score is to stay on top of your credit.
Go through and look for any errors or discrepancies that shouldn’t be on your report. You can call the credit reporting agencies to have them dismissed if you feel there’s an error.
You also want to keep track of your progress by seeing how your score looks each month. Your credit card company or bank will often offer free credit report monitoring. On their app or website, you can log in and see a snapshot of your score and how it’s changed over the last 30 days.
Achieving the Highest Credit Score Possible
To achieve the highest credit score possible, there are a few items you’ll want to focus on. The first is paying off your debts. Keep your credit cards open and don’t use your available credit. This will have the biggest impact on your score.
Make sure to make your payments on time and live within a budget that allows for paying all your bills each month. If you’re interested in using a loan to help you pay off debts and get you out of the hole, fill out the contact form here. We’ll help find you a loan and get you back on track.