You may have heard the saying, “no credit history is not good credit history,” and it’s absolutely true! As a Canadian resident, your credit history is often used to gauge your reliability and legitimacy. This is why you should always look for ways to build a solid credit history and have a good credit score.
But what exactly is your credit score?
Your credit score is a score assigned to you based on your credit report and your past financial statements. TransUnion and Equifax are the two credit bureaus in Canada that are responsible for calculating your credit score. Your credit age, credit mix, payment history, credit utilization rate, and hard inquiries are all factors that determine your credit score.
Are you looking for ways to improve your credit score? Here’s how you can do it.
1. Improve Your Payment History
Your payment history is one of the most important determinants of your credit score. Poor credit history will quickly translate into a low credit score. To that end, make sure to pay off your statement amount and avoid carrying your debt forward to the next billing cycle.
2. Keep an Eye on Your Credit Report
Always keep an eye on your credit report so you can identify any red flags that need to be dealt with. Small steps towards financial discipline will significantly add to your credit score and help you reach a good/excellent score.
3. Get a Secured Credit Card
Secured credit cards are backed by collateral that can be liquidated in case you default on your credit. If you have a poor credit history or you’re just starting, you should get a secured credit card and use it to build your history.
4. Minimize Your Credit Utilization Rate
Your credit utilization rate is the average of the debt you’ve taken divided by the available credit. For example, if your available credit is $1,000 and you take an average of $300 of debt every month, your credit utilization rate will be 30%. Typically, your credit score is better if you have a low credit utilization rate (ideally less than 30%) and pay off your credit on time. This way, they know that you’re only lending money for what you need.
5. Don’t Apply For New Accounts Frequently
Every time you apply for a new credit card, the creditor starts a hard inquiry about you. Frequent and multiple hard inquiries can have a negative impact on your credit score. When choosing a new credit card, make sure to do all your research and find one that gives you the most benefits, so you don’t have to apply for another card.
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