Ultimate Guide to Improve Your Credit Score In Canada

Ultimate Guide to Improve Credit Score In Canada

Improve credit score

Getting a new credit met sound great, but here as some things to consider before applying for your new credit card. In this article, I will be highlighting on credit scores, how important they are to your chance of getting credit, and how to improve credit score. After you’re done with this post, you’ll understand:

What is Credit Score
What does Credit Score Mean
How credit scores are calculated
What’s exactly is on a credit report
What Factors Make Up Your Credit Score
Why Credit Score Are Important
How to get a copy of credit report and credit score
How to Improve Credit Score

What is Credit Score

The first vital step to know before you can improve credit score is the term itself: “credit score”. How credit score work and the credit score world, the term credit means your reputation as a borrower, and it has to do with your history of staying on top of loans and credit cards.

You may be scared by getting a credit card or going in debt simply because of other stories that people in your life have had, but a credit card is simply a tool used to manipulate money it’s not good or bad, but it can be used in great and terrible ways.

Before lenders will sign off a loan with you or open a new credit card for you, they want to find out your credit report (that’s why to improve credit score before applying for credit is vital). Your credit report tells the credit companies of your borrowing history and based on that, the lender determines how much to charge you for your loan and whether or not to approve you for the loan or not.

So, whether it’s taking a loan to pay for college, a new car or a new house credit scores are super important. Before we get on to how credit scores are calculated and how to improve credit score, you need to know how the score works like a diploma; it’s just a number that averages your history.

You can look at your credit report which has all the information on your borrowing on it just think a great report.

Remember having a good credit score or FICO score is one of the essential factors to getting your credit card approved.

But lenders like banks and businesses don’t want to spend 15 minutes analyzing how well you pay back your loans especially when they might have thousands of applicants that day. Instead, credit bureau uses an algorithm which is occasionally updated to give you a number, credit report and a credit score. The number is used by the banks and businesses to access your creditworthiness.

What does Credit Score Mean

Here’s where the good credit versus bad credit comes in. A high credit score is a sign of a good borrowing history, the lower your score, the harder it is for lenders to approve your loans. They will see you as risky, and they wouldn’t want to give you money.

Now it’s common for lenders to set rules their applicant must follow to sign a loan with them. Like one lender might not approve scores under six hundred fifty (650), the same lender met approve score between 650 – 720 but give them a higher interest rate, then for scores that are over 720 they might get a low-interest rate.

Read More: Best Credit Cards in Canada for 2019

How credit scores are calculated

What determines your credit scores? Your credit scores are determined by credit bureaus or credit report agencies. But to get the credit scores you have to start with the credit report.

Credit bureaus are simply companies that gather your financial information on your credit report. Here in Canada, there are two main credit bureau Equifax Canada and TransUnion Canada.

The fair credit reporting act (FCRA) issued by the Canadian government state standard guideline for all credit agencies to follow when reporting on your credit. All other businesses like banks can buy your credit report from the credit bureaus. These credit bureaus use computer programs to analyze your credit report and give you a score just like I explained earlier.

This software scans your report for qualities patterns and potential pitfalls and your borrowing history. The credit score is usually what most lenders look at.

With so many loan applicants they don’t have the time going through pages of each person report, so they just come up with a number. Credit score makes it easier and faster to determine loan eligibility for applicants.

What’s exactly is on a credit report

If you want to see what’s on your free credit report card, then go to creditsesame.com. They also give you a free credit score update every week.

If you don’t monitor your credit reporter or score very often, someone could be stealing your identity without you knowing it. Credit reports gather information about specific credit history events.

Your credit score report list things like:

– The amount you’ve borrowed

– Your payment history

– Whether or not you have any outstanding loans

– Any loans you’ve had in the last 7 years

– Current loans

– Any minimum monthly payment you’re making

– Instances of force closure or bankruptcy

Read More: Credit Card Fees and 10 Ways to Avoid Them

What Factors Make Up Your Credit Score

 

Improve credit score Each credit bureau puts out credit score or a Fico score. Fico credit score range from 300 – 850.  The scores made up of the following factors:

10% of it is the type of credit, is it an auto loan, a home loan or a student loan this makes a difference but not very much.

10% is for new credit; this is your credit seeking activities. Statistically, if you’re seeking lots and lots of new credit in a short amount of time, you’ll be seen as risky which makes your credit score go down and your interest payment goes up.

Credit bureau checks these by something called “Hard Inquiries” which is a term used any time a lender checks your score.

15% is the length of credit, to calculate this, it will be your old account, your new account, and the average age.

35% for your payment history, the largest portion of your credit score is determined by your payment history. Now, this can be either good or bad, but it also deletes off after seven years. If you have a bad payment history with a couple of bad notes, you can call some of the lenders and get some of these bad payment histories removed.

30% is the amount owed; it’s called credit utilization which is the percent of how much you borrowed divided by how much you can acquire in total. On a credit card where you met have a limit of a thousand dollars ($1,000), if you only use two hundred dollars ($200), your credit utilization will be 20%.

Experts say to keep it under thirty percent (30%) to stay in the clear and under ten percent (10%) for the best result.

Why Credit Score Are Important

Here’s why credit scores are important in your future. Like it’s stated above, goods credit scores are important for securing loans. Securing loans means that you are better equipped to accomplish your purchasing goals like buying a house, a car or even paying for college.

Because let’s face it, if you’re not rich you’re going to need some loan to help cover your huge necessity of expenses and even if you do have a tone of spare changes around it’s a good idea to keep some credit active to keep your score high.

Let make this clear, if you use a credit card correctly, you will not have to pay any interest, but your credits score will increase. I’ll talk more about that in my subsequent post.

Credit is not bad; it is when you use it irresponsibly that it can have downfalls. For some people like me paying $400 on total interest for a car loan is worth the one hundred points over three years.

To be able to get a lower interest mortgage I’m only done with two main takeaways from this article.

How do I get a copy of my credit report and credit score? Improve credit score

You can get a free credit report by going www.annualcreditreport.com. Credits scores are a bit harder to get, hard but not impossible. The easiest way to do this is to ask your lender for your score anytime you sign up for a loan.

How to Improve Credit Score

It’s never too late or early to start improving your credit scores. There are some easy ways to get and keep a good credit score. Eighteen is the prime age to start working on your credit score, here are a few suggestions to get you started.

– Pay your bills on time: sounds like a no-brainer, but seriously this is one of the easiest and most important ways you can have a good credit score. You can increase the effectiveness of this by having a monthly budget retract your money.

– Diversify your types of credit: This means having different types of credit cards in your borrowing history, different credit card, different loans. One easy way to do this is to have a credit card or two but make sure to pay down to zero dollars each month this will increase your credit score.

– Be a wise consumer: If you’re like me its way easier to spend money than save money especially if you aren’t tracking it or if you’re in business, but try to base your spending decision on what you need not what you want this will make sure that you don’t overspend by which can cause you to default on your credit loan payments.

Having your credit score fixed and intact, you need to get the best credit cards that best suit your spending habit and financial life. Click here to see all the best credit card in Canada. If you need any form of help feel free to make it known via the comment section or contact us at Financefeat via email.

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