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 Improving Your Credit Score Financial institutions and credit card companies rely heavily on your credit report when they are determining your interest rate. Beyond saving money, employers, cell phone providers and other businesses will often look at credit reports when making a decision. What is a credit score? A credit score is a judgment of your financial health that tells lenders what type of risk they are taking on, if they lend you money. The higher the score, the lower the risk. The three main Canadian credit-reporting agencies, Equifax, Experian and TransUnion, report scores on a scale between 300 and 900. So what can you do to make sure these factors are giving you the highest possible score? First, get a copy of your credit report from all three agencies. Check the Useful Credit Score Links at the bottom of the page to get the web links and phone numbers. They will provide your credit report either free (by mail) or a more detailed version for a fee. Check to make sure the information is accurate; if it’s not, contact the credit agency to get it corrected. Your Payment History This information reports spending and balance history and how often you have missed a payment. What can you do? Pay off your balances/bills in full by the due date or at least make your minimum payments. Do not miss payments and verify all the transaction activity on your statements. Use your credit cards on a regular basis so there is recent positive payment information in your history. Your Bankruptcy and Collection History A key factor is whether you have had any collections or bankruptcies recorded against you. Having either of these will lower your score significantly. Likewise, judgments, consumer proposals and credit counseling services lower your score. Your Outstanding Credit Balances This is a critical element of your credit score and a combination of factors is considered. Total outstanding balances, number of accounts and your available credit are part of the equation. Having too much available credit can harm your score if lenders believe you have the potential to spend more than you can pay back. However, total outstanding balances should not exceed about 35% of your total credit limit, having more than this may signal you are living beyond your means. Therefore, think twice about closing a zero balance account, as it will decrease your credit available so your total percentage of outstanding balances will increase. Your Account History This refers to how long you have had open credit accounts. If you choose to close an account – close a more recent one. The longer your credit history the better your credit score, assuming your payments are on time. Your Inquiry History The number of recent inquiries into your credit report determines your risk profile. The more credit application inquiries, the more risky you look. Research has shown people seeking new credit accounts are more risky than those who are not. It does not mean every credit inquiry will harm your score. If you are going to several institutions to get the best rate the credit bureau will be able to tell and will count it as one inquiry. The best way to manage this part of your score is to apply for credit only when you need it. Your Credit Mix If you only have credit cards on your credit report, your score will be lower then if you had a mix of installment loans and credit cards. To improve your score even more, pay down installment loans as fast as you can. Your credit score is one of the ways a lender or other business checks on your financial health. Just like your physical health, it is your responsibility to check and maintain your credit score. If you have questions about your credit report come in, drop us a line or give us a call, we are here to answer your questions and figure out how to improve your financial health. Useful Credit Score Links: Equifax Canada: 1 800
465-7166 • www.equifax.ca
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