Improve your credit score

How to Improve Your Credit Score

Improving your credit rating can be hard work, but it is achievable, no matter what your starting point is. If you’re looking to improve your credit score, F.J. Zielski & Associates Inc. can help you with the process. Whether you have a poor credit score or no credit history, you may be unable to negotiate fair terms for a loan until your rating improves. Consider the following guidelines as initial steps:


Set Up a System to Pay Your Bills 

Be aware of your due dates, and set up repeat phone or computer calendar reminders and automatic bill payments where possible in order to ensure timely payments. Your payment history is reported to the credit bureaus monthly.

Get overdraft protection on your chequing account to avoid the risk of an NSF payment. Your chequing account history can demonstrate financial responsibility to credit lenders when you apply for credit in future.


Stabilize Your Income Source

Employment stability improves your credit score, so don’t change jobs frequently. Lenders want to see that you can keep a job and that your salary rises over time as this puts you in a good position to pay your bills. Your salary history is particularly important when a lender assesses your suitability for a mortgage.

Focus on Making Payments

Pay your debts as quickly as possible, using any extra money left over in the month to prepay expenses, your credit card or even your mortgage if possible.

If you cannot pay all of your bills in full, then pay at least the minimum required when it’s due and don’t use your credit further until you can pay your bills in full.

Manage Your Use of Credit

Use some credit each month to build a credit history, but only use what you can pay off in full. If you avoid using credit entirely then your score will be low because you don’t have a record or owing money and repaying it. The credit company might determine that you no longer meet their standards and lower your credit and even close your account due to inactivity, which makes it harder to obtain new credit.

Use only one credit card that you can pay each month through your bank. If you avoid multiple credit cards, including retailer credit, you may find it easier to follow the repayment schedule you committed yourself to.

Keep your utilization ratio low, which means limiting the percentage of the total credit limit you use to a minimum. For example, if your credit limit is $10,000 and you are using over 30% every month, your credit score will suffer, despite timely payment. What is key is not how quickly you repay the total debt but rather how you keep your debt obligations low.

Reconsider any purchase that could put you above your credit card limit, trying to keep your balance well below the limit. The higher your balance, the greater impact it has on your credit score.

Understand Your Credit

Learn about how your credit score is calculated at Equifax and Transunion.

Recognize that certain damaging information will not be removed from your score right away when your activity changes. For example, a consumer proposal legally stays on your record for 3 years and a bankruptcy stays on your record for 6 years. You can contact the credit agency to remove this information as soon as the time has lapsed, however.

Understand that changing financial institutions can hurt your credit score even where refinancing leads to you to pay lower rates. Not only do you get hit by the hard inquiry made to secure the account transfer, your utilization ratio can rise as well.

Rethink New Credit Sources

Ask about credit checks before you secure new services and don’t seek credit from multiple sources in a short period of time. Your credit score can decline when an agency/individual requests your credit score, especially if there are many inquiries in a short period of time. Several inquiries at once could be looked upon that you are desperate for money and are unable to obtain credit, regardless of whether it’s true.

Avoid applying to second-rate creditors, such as retailers (including car dealerships and furniture stores), as these “local” finance plans are often considered to be a lesser form of credit for those who can’t obtain credit elsewhere, casting you as a higher risk to potential creditors. Additionally, retail creditors don’t issue a revolving limit so your available credit is typically maxed-out as the purchase amount. Being maxed-out on the debt owed is damaging for your credit score as it creates a high utilization ratio.

In fact, instead of opening new accounts, maintain long standing ones. Even opening a new chequing account will generate a hard inquiry with the credit agency as does applying for a new phone or other utility services.

Secure Your Credit

When you need a loan, obtain it through secured credit if possible as this will reduce your interest costs. A secured line or credit or secured credit card has collateral to offset the credit limit extended.

Review Your Credit Report Annually

Make it an annual habit to obtain your (free) credit report as your score does not change when you inquire about your own information. Review the information carefully to identify and work on the negative factors that are influencing your score. You have the right to explain or protest and can add an explanatory statement to your credit information for lenders to see when they inquire about your credit score.

Redress any errors on your credit report immediately with the creditor or otherwise with the credit agency. Removing faulty information will improve your score.

Don’t Share Your Credit

Never co-sign a loan; it could ruin your credit if the person you co-signed for doesn’t make timely payments. If a creditor is requiring a co-signer, it’s because the debtor doesn’t meet the historical statistical criteria needed to repay the loan.

Credit Counselling in Kingston & Beyond

Having a good credit rating shows you manage credit well and it can increase your borrowing capacity significantly, with more favourable terms. If you would like to improve your credit score, contact us for more help. At F.J. Zielski & Associates Inc., we provide credit counselling in Kingston and many other services as well. Call our team at any one of our four offices.