Improving Your Credit Score

A credit report is a summary of your credit history.  There are two major report reporting agencies in Canada: Equifax and TransUnion.  The report contains factual information on your credit use and also personal information such as your address, employer and public records (such as judgements or bankruptcies).

Your credit score is a number between 300 and 900 that you are given using the information in the report.  A good score is 600 or higher.  Anything over 750 is excellent.

The actual formula for calculating a credit score is not publically available, but there are main facts that do affect the score.  Knowing and understanding these can help you improve your credit rating.

PAYMENT HISTORY: Making payments on time is key.   If you cannot pay the full balance, be sure to at least make the minimum payment

USE OF AVAILABLE CREDIT: Do not max out your available credit.  Try to use less than 35% of your available credit.  The larger percentage of your available credit you are using, the larger risk the lenders view you as.

LENGTH OF CREDIT HISTORY:  the longer you have your accounts open, the better the score

NUMBER OF INQUIRIES:  This one is very important.  The number of times you apply for credit affects your score.  If lenders see lots of credit applications, they view it negatively – so be very cautious about this.  It is a good practice to only apply for credit when you need it.

TYPES OF CREDIT: A mix of types of credit will help your credit score (ie credit card, car loan or other loan)