5 Tips to Improve Your Credit Report
While there is no fast-track to a good credit file, here are 5 tips to improve its quality:
- Beware of late payments
- Keep an eye on the authorized limit
- Limit the number of cards and keep your “old” accounts
- Reduce your debt by starting with your credit cards first
- Beware of numerous credit applications
1. Beware of late payments
Never pay your bills late. Regardless of whether the due amount is high or low, a late payment is never good. Moreover, a rating of R-3 or less is likely to be frowned upon by your creditors, whether it’s for a $200 or $2000 account. And any bad note remains on your report for six long years. Discipline therefore pays off as it is the most important factor the calculation of your score and the quality of your credit report.
2. Keep an eye on the authorized limit
Keep your credit card and line of credit balances low compared to your credit limit (ideally at 35% or less of it). Indeed, the closer your balance gets to your authorized limit, month after month, the more negatively your score and the overall quality of your credit report will be affected. Know that this rule applies even if you pay off the full balance every month. A low ratio indicates that you have the potential to go into debt but choose not to. This is the second most important factor for calculating your score and improving your credit report.
3. Limit the number of cards and keep your “old” accounts
Accounts that have been open for a long time are more “profitable” for your score than newly opened ones. Indeed, a longer credit history gives a better picture of your payment habits. In addition, it gives a better picture of your stability (job and home). That being said, of all the instruments, high-interest loans and credit cards are the least well perceived due to their high interest cost. Set a goal to have no more than 2 credit cards.
4. Reduce your debt by starting with your credit cards first
If you need to reduce your debt, always start by reducing the amount due on your credit cards. Two reasons: credit cards generally cost you more in interest than other types of credit. Also, more expensive indebtedness in interest fees will be seen worse than more “affordable” indebtedness in interest fees. To find out if your debt level is worth watching, calculate it with our debt ratio tool. These steps will help you improve your credit report.
5. Beware of numerous credit applications
Avoid unnecessarily multiplying credit applications with creditors. Indeed, a high number of applications is detrimental to your score, especially if they result in refusals. Many demands can give the impression that you are short of money. And remember that a credit card application to have a one-day discount in a department store is a formal credit application, even if you do not keep the card afterwards. If you are shopping for a house or a car, these steps taken in a short period of time will usually be considered as a single application. Make sure it is.
Just like a reputation, improving your credit report can only be achieved over the medium and long term and it can easily be tarnished. When it comes to your credit report, be cautious and patient. Never go to the maximum of your financial capacity. Finally, remember that just because you have the ability to go into debt doesn’t mean you should.
To learn more about the 5 tips to improve your credit report, check out our “understand your credit report” resource or contact one of our advisors. It’s free, confidential, and without obligations.
CAUTION: For more information about your credit report, we invite you to visit the websites of the 2 credit agencies in Canada, Equifax.ca and TransUnion.ca. The information related in this article was taken from these sites and should not in any case be interpreted as legal advice.