Your credit score is one of the most critical factors when applying for a mortgage or other financial products. It’s not just a number it’s a reflection of your financial habits, and improving it can open doors to better rates, higher approval odds, and long-term savings. Whether you're starting fresh or looking to repair past mistakes, here are six practical tips to improve your credit score.
1. Know Where You Stand
Before you can improve your credit, you need to know what your current score is and what’s affecting it.
- Check Your Credit Report: In Canada, you can access your report for free through Equifax or TransUnion.
- Look for Errors: Mistakes, such as incorrect account balances or late payments, can drag your score down. Address any discrepancies without delay.
- Understand Your Score: Factors like payment history, credit utilization, and account age play significant roles.
2. Pay Bills Promptly, Every Single Time
Your payment history constitutes 35% of your credit score, making it the most significant factor.
- Set Alerts: Utilize apps, calendar notifications, or automatic payments to guarantee you never overlook a due date.
- Address Missed Payments: Late payments can remain on your credit report for up to six years, but making consistent payments now can help mitigate past errors.
3. Keep Your Credit Utilization Low
Credit utilization—the amount of available credit you use—should ideally stay below 30%.
- Spread the Load: If possible, distribute balances across multiple credit accounts to avoid maxing out one card.
- Pay Down Balances: Focus on reducing high-interest debts first to free up credit and save money.
- Request a Limit Increase: A higher credit limit can lower your utilization rate, but only if you avoid additional spending.
4. Avoid Applying for Too Much Credit at Once
Each time you apply for credit, a "hard inquiry" is made, which can temporarily lower your score.
- Be Strategic: Apply for new credit only when necessary, and space out applications by several months.
- Avoid Impulse Applications: Opening multiple accounts at once can signal financial instability to lenders.
5. Vary Your Types of Credit
Lenders like to see that you can responsibly manage different types of credit, such as credit cards, loans, and a line of credit.
- Maintain a Balance: While a diverse credit mix can help, it’s not worth taking on unnecessary debt just to improve your score.
- Keep Old Accounts Open: The length of your credit history also contributes to your score, so avoid closing older accounts if possible.
6. Exercise Patience and Consistency
Improving your credit score takes time, but steady progress will pay off.
- Focus on Long-Term Habits: Building good credit is about consistent financial management, not quick fixes.
- Monitor Progress: Regularly check your credit report to track improvements and stay aware of any changes.
Why Your Credit Matters
A strong credit score can help you:
- Qualify for better mortgage rates.
- Gain access to financial products with favorable terms.
- Build financial confidence and stability.
Whether you're preparing to apply for your first mortgage or simply looking to strengthen your financial health, improving your credit is a crucial step.
*Check out my blog post on the power of saving
Need Help With Your Credit?
As a mortgage agent, I understand the role your credit score plays in securing your dream home. If you’re working to improve your credit or wondering how your score affects your mortgage options, I’m here to help.
See also Debt Re-Financing,