Credit Scores: 5 of the Best Ways to Keep Your Rating High

Credit scores are essential in today’s world. Not only do you need them to qualify for most mortgages and loans, but a decent credit score can take you a long way even when renting or applying for a high-end credit card.

Often, rates are lowered for those with a higher score, as it demonstrates to lenders that you’re likely to pay back your debts in a timely manner. A good or excellent credit score is essential to not only qualify for perks and rewards, but also grant you access to more favourable terms on loans.

Life throws all of us unexpected curveballs, and maybe your credit score is lower than you would like. Or, perhaps you want to raise your already good credit score even higher. There are many simple steps you can take to maintain or improve your credit score as quickly as possible.

Here are 5 of the best ways to keep your credit score high:

1. Pay your bills on time

Making on-time payments is the key to maintaining and increasing your credit score. This is because payment history makes up around 35% of your total credit score, which means that paying bills on time is one of the easiest ways to jack up your score. Paying bills consistently on time, over time, will indicate to your existing and potential creditors that you are financially responsible and trustworthy.

Some lenders or mortgage broker services will offer longer grace periods to pay off your bills, but it is important to make sure you never pass the due date. This will avoid potentially being reported to the credit bureau.

If you have an overdue bill, contact your provider as soon as possible to arrange a payment plan, as overdue utility bills in particular can hurt your credit score. Also, remember to always pay off the oldest dues first before moving on to more recent ones.

2. Keep your credit utilization low

Another factor that affects your credit rating greatly is credit utilization, which comprises about 30% of your credit score. This term refers to how much credit you’ve used previously compared to the net amount of credit available for you to draw on.

The most important tip we have is to always keep your credit utilization below 30%. Therefore, if you’re looking to buy a house or take out a loan, be sure to find out how much of your available credit you’ve already used up to keep the amount low. Here are two tips our team has to keep your credit utilization rates low:

1. Pay more than the minimum payment on your credit card. This will also save you money that would otherwise go towards interest.

2. Under use your credit card or use it up to 30%. For example, if your credit limit is $1000, then use up less than $300 a month.

3. Use all existing lines of credit

Most people often have a couple of different credit facilities in addition to their primary credit card that they never end up using. Avoid neglecting these other dormant credit cards when trying to maintain and maximize your credit score. Instead, try using all available credit fairly regularly, even if it’s for extremely small amounts. This is because older credit facilities contribute “score juice” to your history, which takes up about 15% of your total credit score.

Often, these credit streams can become stale and end up not contributing to your history. To combat this, just refresh the facility by making a modest payment and paying it back with a bit of an increase immediately.

4. Be careful when applying for additional credit

The type of credit inquiry you apply for can impact your credit in different ways. A hard credit inquiry (also known as a hard pull or hard check) is when a potential lender or mortgage broker service checks your credit report before approving your application. As this involves full access to your entire credit history, it can have a negative impact by staying on your credit report for up to 3 years.

Soft credit inquiries (also referred to as a soft pull or soft check), on the other hand, take place when you check your own credit score before applying for a mortgage or loan. This does not affect your overall credit score.

5. Pay off disputes while handling them

At Canadalend, we recommend that you regularly check your credit report. Not only will it ensure that the accounts listed are accurate, but it will also make certain that the credit inquiries conducted are done with your permission.

If you do spot an error on your credit report, it is important to take action as soon as possible and dispute any inaccuracies on your report to avoid further issues. To do this, contact the financial institution or collection agency reporting this information to you. If they verify that their information is correct, then your next step is to file a dispute with the credit bureau. Equifax will then review the details and change the information accordingly.

If you run into such a situation, it is extremely important that you pay off the disputed amount first and continue the process. If you choose to wait out the investigation process and it takes a while, you run the risk of interest fees and getting charged on late payments. If the charge is indeed fraudulent or mistaken, you will get the amount back to your account anyway.

There you have it: 5 tips to keep your credit score high. We have seen that, in general, consumers with lower credit scores can see their scores improve in as little as 30 days. This can be extremely beneficial, whether you are waiting to refer to a mortgage broker service for a home loan or wanting to get approval from a landlord you wish to rent from.

These actions, when worked on consistently, may increase your credit score by up to 100 points! If you’re still struggling with low credit, reach out to our team for advice and more expertise. For more information on credit scores, call Canadalend at 1-866-422-6536 or contact us here.