If you’ve tried to buy a car, a house, or sign up for a credit card, you know how important your credit score is.
Not only can a poor score hinder your loan choices and lead to higher interest rates, but it could count against you during job searches and mean higher insurance premiums.
The average Canadian credit score is around 650, which is usually in the “fair to good” range. The higher the credit score, the more affordable the product. With that in mind, a 650 score could use some improvement.
I’ve determined these seven easy steps can help you increase credit score by 100 points in Canada within a short time frame. If you’re concerned with your financial health, here’s how to boost it.
- Check your credit score
- Dispute errors
- Make on-time payments
- Get caught up on past due amounts
- Don’t close paid off accounts
- Spend less than your available credit limit
- Mix your credit
Tips To Increase Your Credit Score In 100 Days
Your credit score can make or break you. Banks, lenders, and insurers use this three-digit number to determine your risk and the likelihood of repayment. It can also secure you a lower interest rate.
But once your credit score falls into disrepair, it’s hard to get it back on track. Here’s what you can do to see improvements in just a few months.
1. Check Your Credit Score
Canadians can get one free credit report every year from two credit bureaus, TransUnion and Equifax. You can order the free report either online, by telephone, mail, or fax.
Most experts recommend getting your free report from one agency, wait around six months, and then order another one from the other. Not only is this request free, but you’ll find discrepancies sooner than waiting out the full year.
Other companies offer free credit scores – Borrowell and Credit Karma are just two to name. They both offer credit cards, personal loans, and mortgages, with services like credit card monitoring and tips to improve your score.
Ideally, it’s best to know your credit score before needing it. That way, if it needs improving, you can use the following tips to boost it before trying to secure a loan or a lower interest rate.
2. Dispute Errors
Mistakes on your credit report could pull your score down, so that’s why it’s important to check it regularly. Some of the more common errors include finding charges you never made or having payments marked late.
If you find mistakes, you can dispute those with the credit bureaus. They will investigate your claim and, if successful, change your credit score. This won’t happen instantly but usually takes around 30 days from your initial dispute.
3. Make On-Time Payments
Your credit score rating is based on several factors and making prompt payments is at the top of that list. Payment history accounts for 35% of your credit score, so making payments on time is crucial to improvement.
While making the full payment is preferred, if you can’t swing it, at least make the minimum. If you find yourself running into trouble making consistent payments, contact your lender for advice and possible renegotiation.
One of the worst things to do is to not pay anything, assume excess late fees, and let a bill go to collections.
4. Get Caught Up On Past Due Amounts
If you’ve already fallen victim to skipping debt payments, now is the time to catch up. Missing just one payment can lower your score by 50 – 100 points, depending on how long it’s overdue.
That credit score dip will take some time to make up and will only increase the longer you let it go.
Not sure which debt to pay off first? Well, there are two main strategies often used.
Debt Avalanche
This method involves making the minimum payment on all your debt owed. With any leftover money, you’ll pay off the debt with the highest interest rate.
Debt Snowball
With this method, you’ll make the minimum payments on all your debt but then pour any additional funds on the smallest debt before continuing to the next.
There are pros and cons to each method, but if followed, both will successfully help you get out of debt and improve your credit score.
5. Don’t Close Paid Off Accounts
It might be tempting to cancel old credit cards you never use but did you know that could affect your credit score? How long you’ve had a credit account open accounts for 15% of your credit score.
Instead, keep those unused credit card lines open, extending the life of your credit history and showing lenders how effective you are at managing your balances over time.
Keep in mind that cancelling old credit cards will impact your credit utilization ratio, a determining factor of your credit score.
6. Spend Less Than Your Available Credit Limit
Need to increase your credit score quickly? Don’t max out your credit card regularly. Not only will you feel the pain when you have to pay it off, but it’ll hurt your credit score.
Why? Well, you can blame it on that pesky credit utilization formula again.
To simplify matters, the credit utilization formula measures the total credit available versus what’s in use. The rule of thumb is to keep your debt to credit ratio below 30%.
On the flip side, you could also ask for an increase in your credit limit. This would effectively lower your debt to credit ratio and increase your credit score.
However, an increased credit limit could potentially mean racking up more debt, so you must have your spending under control before considering this option.
7. Mix Your Credit
Varying your credit types is an easy way to increase your credit score. If you have a credit card, car loan, and mortgage that you regularly on time, that’ll show lenders you’re a good borrower that can handle different credit items.
But don’t go crazy. There is no need to have several credit cards or personal loans just for the sake of increasing your score.
How Long Does It Take To Improve Your Credit Score?
If you’re making the effort to increase your score – paying bills on time, checking your credit report, and mixing up your credit lines, you want to see results fast. Unfortunately, lenders and credit bureaus aren’t always speedy.
How your credit score improves really depends on where it started. This includes your current debt, a history of bankruptcies and missed payments, and your available credit limit.
If you’ve struggled in the past with poor credit, making sweeping changes and catching up on past due amounts (remember payment history accounts for 30% of your score) could change your credit score for the better in just a few months.
Lenders regularly disclose their information to credit bureaus. However, not every lender follows the same timeline – some report every 30 days while others wait 45 to 60 days.
Because of this, any positive changes you’ve made in between won’t show up for some time.
While this might be disheartening, keep making progress and follow the tips above to get your financial health in a better position.
The Bottom Line
Credit is important to many facets of your life, so if you struggle with a low score, improving your credit should be high on your priority list.
Making timely payments is one of the easiest ways to get you on the fast track to improving your credit score. If you want to know more about how it’s determined, check out this article on the five factors affecting it.
