The Globe & Mail today published a great article entitled “Nine Steps to a Better Credit Score” and I thought it would be a great time to revisit this topic. I have spoken before how important it is for Canadians to know their credit and showed you how to request your own credit report for free, but the list provided below goes one step further in showing you how you can improve your credit as well.
Pay special attention to #9 when in the market for a mortgage. While it does pay to shop around for a mortgage my suggestion is to find a mortgage broker you trust and looks out for your best interests from day one and will provide you not only the best mortgage rate but also the best mortgage product for you.
1. Know your score. The score range in Canada is 300 to 900 – the higher the better – and reflects a person’s credit history over the past six years. Only 5 per cent of Canadians have a score of 850 or better. Checking your score periodically can alert you to mistakes as well as credit fraud.
2. Pay your bills on time. Making a credit card payment even one day late will hurt your score. If you’re paying online, send the payment at least three banking days before it’s due to allow enough time for the transaction to be processed. Setting up a small automatic payment to your card issuer each month will ensure you never forget to pay at least the minimum.
3. Never exceed your credit limit. If you’re close to being maxed out, make sure you pay more than the minimum or the interest due could push you over your limit. Going even $5 over your limit could lead to a costly fee from your credit card company and will hurt your score each month it happens.
4. Don’t apply for store credit cards. Even if you’re just after a one-time discount for signing up, these cards, with interest rates as high as 29 per cent, are viewed negatively by the credit bureau and drag down your score.
5. Spread out your spending. The percentage of available credit you’re using each month affects your score, so it’s better to have two charge cards at 50-per-cent capacity each than one that is maxed out.
6. Prioritize your payments. Important as they are, mortgage payments generally are not reported on Canadian credit reports, so it’s more important to make your credit card, loan and lease payments on time.
7. Beware of closing accounts. Even if you’re in a dispute with a lender, make your payments. A missed payment will show up on your credit report, can really hurt your score and is very hard to fix. When closing an account, get it in writing that it was closed with a zero balance.
8. Don’t close unused credit cards. If you have a low-interest card you don’t use, keep it open and use it periodically. Having a zero-balance credit card actually helps to improve a low score.
9. Don’t apply for too much credit at once. Don’t lease a car, sign up for a new cellphone and apply for a loan all in the same month or two. The credit bureau sees this as a sign of financial trouble. Beware, also, of being pre-approved by several lenders before you’re ready to buy. Although you can check your own credit rating without penalty, pre-approvals from lenders count against your score.
If you have any further questions about your credit or how to obtain a mortgage please feel free to contact me by any of the methods below: