A credit score can have a huge impact on your life — but many people have no idea what their score is, according to Laurie Campbell, the CEO of Credit Canada Debt Solutions, a non-profit credit counselling service.
Working to raise your credit score will help you in several ways. Having a good credit report to show prospective landlords or employers can be an important part of finding a new home or landing that new job.
Raising your credit score will also help you get better interest rates on loans to buy a car or another big item. Using Campbell’s five simple tips will help you build up your credit score.
1. Find out what your credit score is. There are two credit bureaus in Canada, Equifax and TransUnion, that provide credit reports free by mail or online for a fee. Order a report from both bureaus and check that the information on each report is accurate. Campbell recommends doing so at least once a year, as well as before you apply for any new credit so you know what money lenders see about your credit.
2. Start with one credit card. Campbell warns against assuming the more credit you have, the better your score for borrowing money. Lenders prefer to see a history of stability rather than multiple open lines of credit. Use your card consistently and pay it off to start building that history. If you can’t qualify for a regular credit card, you can apply for a secured credit card, but you’ll be asked to put down a cash deposit first. Only use your card for planned purchases — never because you don’t have enough cash in the bank. Campbell also advises against lending your card or disclosing your PIN to anyone. Someone using your credit card is your responsibility.
3. Pay all your bills on time. According to Richard Haggins, Senior Education Facilitator at Credit Canada, this is the most important thing you need to keep doing to build up your score. He recommends setting up automatic payments or finding a way to remind yourself when bills are due. He also advises that payments should be made before the due date, so that they will always be on time.
4. Don’t bounce cheques. Some companies do report bounced cheques to credit bureaus, especially if it happens repeatedly. If you pay a bill with a cheque that bounces, and that company reports it, it could bring your credit score down.
5. Make sure you’re showing long-term stability. That means you should avoid cancelling credit cards or switching credit card companies, even if you think you’ve found a better deal. It’s more important to show that you’ve been stable in paying off purchases on one card over a long period of time. It’s also important to remember your credit score won’t improve overnight — it takes time.
Your credit score can be a source of stress and a bit of a mystery if you’re unfamiliar with how it works. That’s why Campbell urges everyone to check their scores regularly and know where they are.