How to Improve Your Credit Score


Credit scores are designed to show a consumer’s creditworthiness and the likelihood that she/he will pay back on time. In Canada, credit scores range from 300 – 900 and is used as a tool by the creditors to assess who is a good candidate to borrow money. Credit score can play an essential role in our financial journey. A low score can affect the eligibility for future purchases, mortgages, and loans, therefore it is very important to build and maintain a healthy credit rating.

“According to Norman Pascal from Pascal & Petters Inc there are several factors that come into play to calculate a credit score”   

Here are 3 helpful tips to help you start improving your credit score:

  • Maintain a good payment history: Your payment history is one of the most important factors in determining your credit score. Paying your bills on time is essential in building and maintaining a good credit rating. This includes paying your credit cards, utility, internet bill, etc. promptly and consistently. The longer history you have paying bills on time, the stronger your credit score will be. If you have several credit cards and monthly payments, set up payment reminders on your calendar so you never miss a payment.  Setting up pre-authorized payments is another way to make sure that your bills get paid on time. It is very important not to miss any due dates as bad payment patterns will show up on your credit report.
  • Keep your Balance-to-Limit ratio low: Credit utilization, the amount you have borrowed compared to your credit limit, is another important factor in determining your credit score. High credit utilization lowers your score and is a strong sign of credit risk for creditors. Higher balances are more difficult to afford and hence could indicate that you have overextended your credit. On the other hand, low credit utilization is an indication that you are a responsible consumer and can responsibly manage your debt. Check balances on your credit cards regularly and try to use less than 35% of your credit limit. For instance, if you have a credit card with a $1,000 limit try to keep the outstanding balance below $350.
  • Build credit history: The length of your credit history is also important in building good credit. Give yourself time and start to establish a long history of paying your bills on time and using credit responsibly. Try to keep the oldest account open to lengthen your period of active credit use. Think twice before closing an old account as having an “older” credit history can be very helpful for your credit score.  More established accounts show that you have a lot of experience handling credit responsibly. Also, it is usually not a good idea to open several new accounts at the same time since opening new accounts can lower the average “age” of your credit.

Remember, achieving a good credit score does not happen overnight. It might take months or even years to build and maintain a healthy credit rating. If you have a low score, do not stress over it, instead start to make better financial choices and try to manage your credit more responsibly.