Improving Your Credit Score

We know creditors like stability. Here are some tips to improve your credit score:

Establish a credit history.

Research shows that consumers with longer credit histories have better repayment records than those with shorter credit histories. Also, consumers who frequently open new accounts have greater repayment risk than those who do not. Your score should improve as your credit history matures.

Maintain low-to-moderate balances and be sure to make your payments on time.

Paying off your debts and maintaining low balances will help to improve your credit score. The score measures how much you owe on all of the accounts that are listed on your credit bureau report. Research shows that consumers owing larger amounts on their credit accounts have greater future repayment risk than those who owe less.

If you can't pay off your entire balance in one month, be sure to pay off as much as possible. If your balance creeps up beyond 75 per cent of your available credit limit, that may be interpreted as a warning signal. You also need to pay your bills on time. Your creditor may overlook the one late payment, but if you make a habit of missing payments your credit score will slide.

Note that consolidating or moving your debt around from one account to another will usually not raise your score, since the same amount is still owed.

Also note that the total outstanding balance on your last statement is generally the amount that will show in your credit bureau report. That means even if you pay off your credit cards in full each and every month, your credit bureau report may show the last billing statement balance on those accounts.

When it comes to managing debt, it is always a good idea to pay down your balance as quickly as possible. Always pay more than the minimum monthly payment required. If you just send in the minimum payment every month, it could take years to pay off your balance since interest is accruing on the remaining balance.

Don't apply for credit unless you really need it.

Just because you get a credit card offer in the mail does not mean you should accept it – think long and hard about whether or not you need the extra credit. Every time you apply for credit, a credit inquiry will be made on you – you want to keep the number of those inquiries to a minimum as m ore than one or two inquiries per year will make you a higher credit risk and lower your credit score.

Research shows that consumers who are seeking new credit accounts are riskier than consumers who are not seeking credit. Inquiries are the only information lenders have that indicates whether a consumer is actively seeking credit.

MORE: How
to get your credit score »

There are different types of inquiries that reside on your credit bureau report. Your credit score only considers those inquiries that were posted as a result of you applying for credit. Other types of inquiries include account review inquiries (where a lender with whom you have an account has received your credit report) or consumer disclosure inquiries (where you have requested a copy of your own report) and are not taken into consideration in the calculation of your credit score

A common misconception is that every single inquiry will drop your score a certain number of points. This is not true. For most consumers, the presence of a few inquiries on your credit file has a limited impact on credit scores. The impact of inquiries on your score will vary, depending on your overall credit profile. Inquiries will usually have a larger impact on the score for consumers with limited credit history and on consumers with previous late payments.

Check your credit report every year and report any errors.


Mistakes in your report may negatively impact your credit score. It's your responsibilityto make sure your credit history is accurate.

What is a "Credit Score"?

What is a credit score?

Your credit score is calculated based on
the information contained in your credit history, which
is tracked by Equifax and Trans Union.

While knowing your actual score is important,
understanding the key factors affecting your credit score
is equally relevant when it comes to your credit standing.

The credit score also referred
to as a FICO Score, which is a mathematical
formula created by Fair Isaac and Company.

The credit score is used
by most lenders to help them decide whether or not you're
a good credit risk. Equifax and TransUnion will crunch
the numbers from your credit report, and spit out a score
somewhere between 300 and
900.

A low score indicates you're
a bad credit risk; a score of 750 or higher puts you in
a lender's good books.

HOW CREDIT SCORES ARE CALCULATED

FACTOR WEIGHT Payment history Bankruptcies, late payments, past due accounts and wage attachments 35% Amounts owed Amount owed on accounts, proportion of balances to total credit limits 30% Length of credit history Time since accounts opened, time since account activity 15% New credit Number of recent credit inquiries, number of recently opened accounts 10% Types of credit Number of various types of accounts (credit cards, retail accounts, mortgage) 10%

After you get your score...

1. Order a copy of
your credit report. Review it carefully and correct any
significant errors.

2. Pay your bills on time.

3. If you have a questionable
credit history, open a few new credit accounts, use them
responsibly, and pay them off on time.

4. Don't open credit accounts
you don't intend to use. Having five or six of the same
type of credit card (Visa, for example) does not work in
your favour.

5. Note that having a credit
card or instalment loan can help boost your score, so long
as you don't have too high a balance and you pay it off
in a timely manner.

6. Keep your balance low
in relation to your available credit. If your credit limit
is $10,000, keeping your balance below $2,500 (or 25 per
cent of your limit) will improve your score.

7. Pay off your credit
card debt instead of moving it around to lower rate cards.
Moving balances to other credit cards (called a “balance
transfer”) and closing out the old account can hurt
your score.