Simple ways to quickly improve your credit score:
- Understand and monitor your credit utilization rate. Being mindful of how much of your available credit your using will help in increasing your score. Credit companies use this to determine how “risky” your spending is – for example, if you’re constantly using 80% of your available credit, your score might suffer. Borrowell recommends that you keep your credit utilization below 30% to avoid setting off any red flags with lenders. Remember: carrying small balances that you can pay off every month (and on time) will demonstrate financial responsibility and in turn, increase your score.
- Don’t remove old debts that are paid off. Once you check your credit report, you might notice old credit card accounts that are paid off but are still linked to your report. Don’t panic! As long as it’s paid off, this can actually help your score because you’re building credit history and it shows you have experience paying off a credit card.
- Set up automated payments. Because credit companies will take into account how much and how often you’re paying off your debt (i.e. are you making your monthly minimum payments?), you can make it easy on yourself by setting up an automated payment. On-time payments make up 35% of your credit score – so it’s important to pay attention to this one!
- Pay attention to when you’re applying to new credit cards. When you apply for a new card, credit companies will do a big “inquiry” into your credit history, which can appear on your credit report anywhere from six to 12 months. It’s important to be mindful of this, as you don’t want to open another application as an existing inquiry is currently there. It might raise some red flags.
- Check your credit score regularly.
Borrowell actually conducted a study that found Canadians who monitored their credit score regularly saw a greater increase in their scores, compared to those who didn’t. Plus, using a service like Borrowell allows you to easily check it online – and if you forget, they’ll send you an updated score every month so you can get a sense of where you’re at. We should also mention, it’s free to use!
What is a good credit score?
In Canada, credit scores range from a score of 300 to 900 (900 usually being the best). You usually want to strive to hover around 700 – credit companies will calculate a “good” credit score at 660, but getting it above 700 will allow you to have access to better rates (interest rates, mortgage rates, etc.) and higher chances at getting approved for something.
Borrowell uses the Equifax Risk Score (ERS) 2.0 - a popular and legitimate credit score used by many banks and lenders.
Does my credit score affect my insurance rate?
Having a better credit score could potentially help you save on your home insurance. Most insurance companies use a number of factors, including credit score, to determine your premium.