Your credit report leaves something to be desired and you want to improve it before applying for a loan, card or line of credit? These five tips might help you.
Whether you intend to obtain credit, request a quote from an insurer or even sign a lease, the quality of your credit file can work in your favor or once morest you.
To boost your rating, Pierre Fortin, president of Jean Fortin, personal finance advisors and trustees, recommends these few proven methods.
1. Beware of late payments
Know that 35% of your bill depends directly on your payment habits. More than 30 days late can lead to a drop in your rating. Be disciplined and pay your bills promptly. Are you afraid of forgetting something? Set up alerts or even better, automatic payments in your account.
A delay is a delay, regardless of the amount. A forgotten invoice of $200 will have the same impact on your file as another of $5,000!
“Many young consumers find themselves with bad credit records for unpaid cell phone bills amounting to a few hundred dollars,” emphasizes Pierre Fortin.
2.Keep an eye on your authorized limit
Please note: 30% of your score depends on the level of use of your cards and lines of credit. For example, if you have a credit limit of $10,000 on your credit card and you use $8,000 of it, this might hurt you.
If you consistently exceed 50% of your authorized limit, your rating will suffer, even if you pay the full balance by the due date.
“Ideally, we should stay within a utilization range of 35%,” advises Pierre Fortin.
3. Limit the number of cards and keep your old accounts
If you have more than two credit cards, this may be viewed negatively by credit agencies. In their eyes, this is a signal that you are desperate for credit and therefore likely to get into debt. One or two cards from major issuers should be enough to transact anywhere in the world.
Agencies take into account the life of the account. The older it is, the more confidence you inspire, because this longevity allows you to assess your long-term repayment habits. If you want to get rid of one of your credit cards, choose the most recent and preserve the oldest.
“Warning: it is not enough to cut it and throw it in the trash, you must also notify the issuer so that he closes your account”, says Pierre Fortin.
4. Many credit requests: red flag!
A large number of credit applications is the first warning signal that you are having financial difficulties. Indeed, an over-indebted person is more likely to seek new credit to repay their debts.
This element represents only 10% of your score, but it tells creditors a lot regarding your financial situation.
“Do not multiply credit applications unnecessarily, for example by taking several steps to obtain a loan,” warns Mr. Fortin.
Say no to store credit card offers because you’ll get a discount. This will count as an additional credit request. On the other hand, if you make several requests within two weeks because you are shopping for a car or mortgage loan, for example, these different steps will be grouped into one, which will not affect your score.
5. Check your credit report regularly
Errors are possible. For example: you have finished repaying a loan, but the creditor has not reported it to the credit agencies and it still appears on your file. This increases your debt ratio which has an impact on your score.
These errors can be easily corrected. On the website of the credit agencies (equifax.ca et transunion.ca), you will find a form to request a correction. This process is free and no fees can be charged to you. If applicable, you may be required to provide account statements or receipts.
“However, the process can take 30 days, sometimes longer, so if you have a loan application to make, do it in advance,” advises trustee Pierre Fortin.
