Last week we covered How your Credit Score is Calculated, this week we will cover How your credit score can be improved.
There are several ways you can improve your credit score.
The number one way to increase your score is to always pay your bills on time. But if you can’t pay the full amount, make sure you are always paying the minimum amount due. Making a full payment a few days late is actually worse and deemed a missed payment.
Lower your credit usage so your credit utilization is decreased. Call your credit card companies and request a higher limit. As long as you don’t use the extra credit card room (don’t over spend). Increasing your credit utilization will raise your score.
If you cannot obtain a regular credit card, you may want to apply for a Secured Credit Card, (this is different than a prepaid credit card). Basically, you send the bank money that is kept as collateral and returned when you pay off your card and close the account. You receive a credit limit based on your collateral (e.g. if your credit card has a limit of $2,000, you will be required to put $2,000 into a designated account). You use the card like a regular credit card and your payment history is reported to the credit bureau as you use it. It’s a good idea to stay below your credit limit and make regular payments to help repair your credit rating.
You can also raise your score by becoming an authorized user on someone else’s account. If you know someone with a really good score they can add you to their credit card as an authorized user which will impact you positively, they don’t even have to give you a credit card to use.
Close extra cards. Many of us may sign up for bonus miles with various cards, but having more cards can hinder your credit limit, you really only need 1 or 2 credit cards.
If you write cheques, be sure that your account has enough funds. Cheques that are returned due to insufficient funds may be reported to the credit bureau.
If you are having a hard time financially, contact the credit bureau (Equifax or TransUnion) and ask for a note to be put on your file explaining your financial difficulties e.g. Job loss, sickness or debt incurred by your partner or spouse.
No matter how bad your credit is, you can improve your score by 100 – 200 points if you start to make changes now.
Next week find out how to obtain a copy of your Credit Report