The past year has not been easy. Many have had to go into debt to make up for job loss or a reduction in employment income. If you’re hyperventilating as your credit rating plummets, we’ve got some tips for you.
First, remember that the credit rating is a number that lenders generally use to decide whether or not to grant you credit. If you want to buy a property, a car or even a new cell phone plan, your credit rating will be checked.
What constitutes a good rating?
Your credit score is somewhere between 300 and 900. If your score is below 500, you may have difficulty getting a loan. If it’s over 700, you’re considered an excellent payer. The average credit score is usually between 500 and 700.
Six tips to increase your score
To boost your credit score, you will need to earn the trust of lenders by demonstrating that you repay the loans issued to you promptly.
1- Keep your credit card balance below 30%
Paying your minimum balance each month is not enough. If you want to improve your rating, make sure you don’t let too large amounts sit on your statement. If you have a credit limit of $1,000 on one of your cards, try not to have a balance of more than $300 at the end of the month. In the best of all worlds, pay off your credit card in full each month.
2- Pay BEFORE the deadline
Whether it’s your electricity, internet, cell phone or credit card bills, try to pay before the deadline and not the same day. Some are used to setting a payment reminder the day of the limit, but this is a delay… and each monthly delay has an effect on your credit rating.
3- Do not close your unused accounts
If you have more than one credit card, try to consolidate your balances on one or two cards at the most, ideally the one with the best interest rate, and pay off the balance of the other cards in full. However, keep unused accounts open as long as possible. The same goes for your lines of credit. This strategy will show that you are a stable payer.
4- Make a budget
Good old budget advice. Not only to make columns of inflows and outflows of money, but also to know what to repay first.
Be sure to pay off accounts with higher interest rates, since they cost you more. Your budget will also allow you to determine a specific amount dedicated to repaying your delinquent accounts.
5- Avoid multiplying funding requests
Whether it’s to buy a car, new furniture for your living room or even a simple loan application, too many credit applications will have an influence on your rating. The more you apply for funding, the more you will seem to be living beyond your means. Basically, only apply for the credit you actually need.
6- Diversify your credit
If you have different products, such as a line of credit, a car loan and a credit card, you prove that you are able to manage your loans well. If you are able to pay them on time, of course. If you only have one or more credit cards, your score may be lower.
Sources: Government of Canada, Transunion, Raymond Chabot, Sun Life