Five Tips to Improve Your Credit Score

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Your credit score is calculated using your credit history, which contains information such as your payment history, the number of loans or credit cards used by you, etc. The number helps lenders evaluate how creditworthy you are, namely, how much of a risk it is to lend you money; in short, how responsible you are with your finances. The score is largely based on your outstanding credit, payment history, and public records. A high credit score increases your chances of getting a loan or credit card, and a low score completely ruins it. Banks and lenders do not like to give loans or credit cards to people with low scores because they do not trust them with their money.

As experts, we at Mortgages with Nicolle Williams and Team Quick have written down five tips to help you improve your credit score.

Tip #1: Keep revolving credit balances at or below 50% utilization rate
Credit utilization is a measure of how much credit you’ve used versus how much credit you have. It is a major factor in your credit score, so it pays to keep an eye on it. Credit-scoring models pay close attention to your credit utilization and consider how much unpaid debt you currently have across all of your accounts. And just how credit utilization and unpaid debt affect your scores can depend on the credit-scoring model. This is why experts recommend keeping your revolving credit balances at or below the 50% utilization rate. 

Tip #2: Don’t miss payments
On-time payments are the biggest factor affecting your credit score, so missing a payment can sting. Late payments get recorded in your credit report as well as make your credit score fall further, making it difficult for you to qualify for the best terms and interest rates on mortgages and credit cards from the lenders. Late payment of dues and your credit score go hand in hand.

It helps to set up all credit on a pre-authorized payment plan to ensure at least minimum payments are made on time.

Tip #3: All written-off debt collections need to be settled
If the credit report shows written-off debt collections that are not settled, then it’s going to get tough for the individual to get a mortgage. Once you settle an account, it means the credit establishment agrees to accept a payoff quantity than the sum originally owed simply. We recommend trying to settle for 50 cents on each dollar owed. But make sure you are in a position to pay off immediately, or any settlement could be rescinded.

Tip #4: Be mindful of the number of credit inquiries you do
There are two types of credit inquiries: hard credit inquiries and soft credit inquiries, also referred to as hard and soft credit checks. Hard credit inquiries are typically the marks you need to worry about affecting your credit score. These inquiries indicate that you’re applying for new debt, such as a mortgage, personal loan, or credit card, and are visible to anyone who checks your credit report. Soft credit inquiries, on the other hand, don’t impact your credit. Creditors recommend no more than three hard inquiries in a twelve-month rolling period.

Tip #5: Have a minimum of two active trade lines reporting on your credit bureau
A credit tradeline is the credit bureau term for an account on your credit report. Each account you have is a single credit tradeline. That’s true whether your payment is current or past due, the account is open or closed, or the account is in your name only or held jointly with someone else. The data in your tradelines is used to calculate your credit score. Experts recommend having a minimum of two active tradelines reporting on your credit bureau, preferably revolving credit, also known as a line of credit or credit card. These tend to have the biggest impact on credit increases.

If you are looking for mortgage agents in Pickering, ON, reach out to us at Mortgages with Nicolle Williams and Team Quick We are an experienced group of mortgage brokers and mortgage agents with a passion for working with Canadian families, one home at a time. We break down the complicated world of mortgages, providing solutions that are designed for you for all your mortgage needs.

We offer services such as mortgage renewal, mortgage pre-approval, mortgage refinancing, home equity/renovation loan, reverse mortgage, first time home buyer mortgage, debt consolidation, second mortgage, self-employed mortgage, bad credit mortgage, new to Canada mortgage, commercial mortgage, private mortgage, equity take out mortgage, construction financing and refinancing. We offer our services to clients across Pickering, Ajax, Oshawa, Bowmanville, Whitby, Scarborough, and Toronto.

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