How to improve your credit score?

1. Pay on time and keep your “old” accounts

Meeting payment deadlines is the foundation of a good credit report. Even a small late payment can leave a significant mark on your report, and a negative record can remain there for up to six years. Whether it’s $50 or $500, a late payment is always viewed negatively by creditors. Payment consistency is the factor that has the greatest impact on your score, making it crucial to organize yourself so you never miss a payment. To do this, consider limiting the number of credit products you use, enabling automatic payments, or setting reminders to avoid missing due dates.

In addition, accounts that have been open for a long time are more favorable to your score than newer ones. A longer credit history allows creditors to better assess your financial habits and demonstrates a certain level of stability. Finally, be aware that some products, such as high-interest loans or credit cards, are viewed more negatively due to their cost. It is therefore recommended to limit the number of credit cards to 2.

2. Monitor your credit card limits

How you use your credit also influences your score. Ideally, you should use less than 35% of the authorized limit on each of your credit cards. Even if you pay off your balance in full every month, consistently carrying a high balance close to your limit can hurt your credit report. The goal is to keep low balances on your cards, as a low utilization rate shows lenders that you have access to credit but choose not to rely on it excessively. This is the 2^nd most important factor in calculating your score and improving your credit profile.

3. Review and correct your credit report

Before applying for a loan, make it a habit to review your credit report. You can do this for free through Equifax or TransUnion. Make sure all the information listed is accurate. An error can be costly: it may result in a credit denial and lower your score. If you notice any inaccuracies, request a correction as soon as possible.

Moreover, creditors place great importance on stability. Maintaining a stable residence, keeping a low credit utilization rate, and avoiding late payments will increase your chances of obtaining financing from financial institutions.

4. Reduce your debt

If you need to reduce your debt, always start by lowering the balances on your credit cards. Their interest rates are often among the highest, and reducing these balances will improve your credit utilization rate (see point 2 above) and, in turn, your score. Lowering your debt level allows you to breathe easier financially while improving your credit report.

Before applying for a new loan, also take the time to calculate your debt-to-income ratio. If it exceeds 40%, not only do your chances of obtaining financing decrease significantly, but it is also a sign that taking on additional debt may exceed your financial capacity. In such cases, it is better to reassess your needs and refrain from borrowing.

5. Limit credit applications

Each time you apply for credit, a note is added to your credit report. Accumulating several applications in a short period can give the impression that you are urgently seeking financing, which may worry lenders. Worse still, if your applications are denied, this directly harms your score. If you are shopping for a mortgage or auto loan, group your applications within a 2-week period, they will be counted as a single inquiry. And say no to store credit cards offered in exchange for a discount if you do not truly need them.

To learn more about your credit report, consult our resource “Understanding Your Credit Report” or contact one of our advisors. It’s free, confidential, and with no obligation.

How long does it take to improve your credit score?

Improving a credit score generally takes between 3 and 12 months, depending on each individual’s situation.

The speed of improvement depends in part on past late payments and the level of debt. A stable financial situation and well-managed debts often allow for quicker progress. However, consistency remains the key to success: meeting deadlines, reducing balances, and adopting good financial habits lead to lasting improvement.

Furthermore, rebuilding credit does not rely on miracle solutions. Promises of rapid improvement often hide pitfalls, such as very high-interest loans offered by certain lenders, which can negatively impact your credit report. In addition, these solutions often worsen your debt rather than provide a truly sustainable improvement to your financial situation.

Like a reputation, a credit report is built over time and can deteriorate quickly. Be cautious and patient, avoid using your full financial capacity, and remember that having the ability to borrow does not mean you should do so.

When should you consult a debt professional?

Certain indicators may signal that it is time to seek professional help to better manage your financial situation and your credit score:

• A financial health assessment showing limited repayment capacity and debts weighing heavily on your finances.
• A high debt ratio, making financial management more complex.
• Credit usage that regularly exceeds 60% of the authorized limit, which can harm your financial health and credit score.
• Ongoing financial stress affecting your peace of mind and quality of life.

These signs suggest that support from a debt professional, such as Jean Fortin & Associés, may help you regain control of your debts and implement concrete, sustainable solutions to improve your credit score.

The Jean Fortin team supports you in regaining control of your finances, reducing debt-related stress, and finding solutions tailored to your situation.

By Pierre Fortin
Jean Fortin & Associés
Personal Finance Advisor
Licensed Insolvency Trustee

WARNING: For more information regarding your credit history, we encourage you to visit the websites of the 2 credit agencies in Canada, Equifax.ca and TransUnion.ca. The information provided in this article was obtained from these sites and should not be interpreted as legal advice.