How can you improve your credit score?

Are you looking to improve your credit score? You might be hoping to purchase a home, secure another form of financing, or simply maintain a healthy credit report. In any case, there are many things you can do on your own to get your credit score in check! Here are four routes we recommend taking.

Don’t apply for new credit 

This is the first, and perhaps most obvious, way to help improve your credit score. New credit or new accounts can have a negative impact on your score in a few ways. First, there’s the clear risk of spending more money than you should. The more credit we have, the more we tend to spend, and increased spending isn’t how you go about improving your credit. Second, when you apply for new credit, lenders will often perform a hard credit check. A hard credit check is an indicator that you are applying for credit and are open to new debts. As a result, you can expect to see your credit score drop a few points. 

Always make your payments on time 

Another big part of your credit score is your payment habits. Late or missed payments tend to have a negative impact, as they can result in fees or penalties. Consistently missing payment due dates will damage your payment history, which heavily influences your credit score. If you have a habit of missing payments, think about setting up automatic payments so you don’t have to do it yourself. If you tend to prioritize certain payments over others, instead try to make the minimum payments on all of your debts. This will ensure you are caught up with all of your payments and won’t suffer any penalties. 

Lower your credit utilization rate

Your credit utilization rate is simply the amount of credit you use versus your available balance. For example, if you have a $5000 monthly limit, and you use $2000, your ratio is 40 per cent. In general, it’s best to keep this ratio at 30 per cent or below. This is the figure lenders generally consider to be a good ratio, as it indicates you have responsible spending and payment habits. To lower your ratio, you can simply spend less from your account if possible. If not, you can also make more frequent payments. This will ensure your balance stays low at all times. 

Consider keeping old accounts open

If you have old credit accounts you no longer use, your first instinct might be to get rid of them. However, it may be a good idea to keep them active. Even if you don’t use them anymore, they are proof of your credit history and payment habits. They demonstrate a pattern of responsible behaviour, and having a rich credit history helps keep your score low. Plus, lenders like to see that you can provide a background of your credit if you are ever applying for a loan.

There are several ways to improve your credit score, and these are some tips to help you get started. If you think you need more guidance in terms of managing credit or debt, you should also reach out to a professional for assistance. As mortgage brokers, we can help you with refinancing, debt consolidation, and many other financial services. The world of credit is closely aligned with mortgages, and we are here to help you navigate it. You can also check out TransUnion and Equifax for more information on maintaining your credit!

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.