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5 Things You Can Do To Improve Your Credit Score

by Scott Hannah

Q: I recently applied for a car loan but was told that because of some negative information on my credit report, and my credit score not being high enough, I didn’t qualify for the 0 per cent interest rate. They offered me a loan at 15 per cent which I declined. I know there are a couple of small utility bill collection items on my file that an ex-roommate was supposed to pay but didn’t. To be honest though, I didn’t think those would really lower my credit score. I also have a couple of credit cards that are nearly maxed out. I’ve had the cards for a few years and always make the monthly payments but sometimes my payments are late. I need to take my credit rating more seriously. What’s the fastest way to improve my credit score? ~Carter

How to get a good credit score that's high.A: The reality is that you can’t improve your credit score fast; however, you can improve your credit rating and your credit score faster by following the five steps outlined below. Don’t fall prey to the online ads from credit repair consultants that state they can improve your credit rating fast for a fee — they can’t. It takes time to build a good credit rating and it takes some time to overcome derogatory information that may be on your credit report. Time and some effort will accomplish your goal of improving your credit score.

Here’s where to start when you want to fix your credit rating:

1. Request a Copy of Your Credit Report

Before taking steps to improve your credit score, you need to know and understand what information is on your credit report and if it is accurate. Contact both credit bureaus in Canada — Equifax and TransUnion — and request a copy of your report. The information from each of them won’t necessarily be the same. You can obtain a free copy, which will be mailed out to you, or you can go to their websites and purchase your reports to get them instantly. Review the reports for accuracy and if there are any errors, report them to the respective credit bureau to have the information corrected.

Here are some detailed instructions for how to get your free credit report.

2. Pay Off All Outstanding Collections

Make arrangements to pay all outstanding collection items on your credit report. Creditors are unlikely to extend credit if a person has unpaid collection items on their credit report as it does not demonstrate good financial responsibility. By paying your unpaid utility bills quickly, your credit score will show some improvement and these items will drop off your report in three years.

Related: Find out how to get unpaid parking tickets off your credit report

3. Make All Future Payments On Time

Missed or late payments can really cause harm to your credit score. It’s important to understand that your payment must be received and processed by your creditors on or before your payment due date. Many credit card issuers are now introducing late payment charges and/or increasing the interest rate when their customers are late with their payments. Make a list of your current debts, the monthly payments required, and when the payment is due. Mark due dates in your calendar to ensure your payments are up to date going forward.

Here’s how to make a pay cheque plan to manage money and payments better.

4. Reduce the Balances on Your Credit Cards

Most people don’t realize that your credit score starts to be impacted when the amount of credit you are utilizing is at 60 per cent of your available credit limit. The closer you are to your credit limits the more it impacts your credit score. I recommend that your short-term goal be to decrease your account balances owing to below 50 per cent of your available credit limits.

To achieve this in as short a time as possible, I would encourage you to take your credit cards out of your wallet and put them someplace safe. This removes the temptation to use them. Set a goal to pay more than the minimum payment each month to help you pay down your debts faster.

Related: 10 Tips to Pay Off Credit Card Debt

5. Use a Budget to Manage Your Finances

You work hard for your money, but does your money work hard for you? If the answer is “no” or “I’m not sure,” it’s time to put a plan in place to manage your finances effectively and get the most out of your money. We call this plan a budget and it will help you to pay down your debt faster; live within your means; pay your bills on time; and help you build up your savings.  Indirectly, a solid budget is the key to improving and maintaining a good credit score.

Learn how to create a personal or household budget

The Bottom Line on Improving Your Credit Score Fast

While your credit score is just one piece of your overall financial picture, it can have a dramatic impact on your finances. If your score is low, it’s worth looking at ways to improve it. The difference in borrowing costs for a person with a low versus a high credit score could be thousands of dollars in additional interest charges each year. As they say, take care of your finances and your finances will take care of you.

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