Preserve and Improve your Credit Score

A solid credit score is your endorsement as a desirable borrower, providing you with access to capital at better rates, saving you considerable interest costs and helping you achieve your financial goals. So, what exactly is your credit score and how can it be preserved or improved?

Your credit score is a number between 300 and 900 that informs lenders how successful you’ve been in managing your credit, debt and overall finances in the past. A higher score provides lenders with greater confidence that you will repay your debts in the future. Scores within the 660–900 range are considered by lenders as good, very good or excellent.

In Canada, there are two credit bureaus that are permitted to collect information on your financial activity and develop a credit report: Equifax and TransUnion. Your report is made available to lenders that you’ve asked for credit. You’re also entitled to see your own report for free, once a year.

Periodically checking your credit score is a good practice. This will help you identify any errors or fraudulent activity that may have occurred. Directions on how to obtain your free credit report from Equifax and TransUnion can be found on the Government of Canada’s website.

Below are 5 tips to help preserve and improve your credit score:

1) Make your payments on time

Always make your payments on time even if it’s not the full payment. Missing even a single debt payment entirely can decrease your credit score.

2) Maintain a long credit history

Keep your oldest credit card active and in good standing to lengthen your credit history.

3) Use different types of credit

It’s better for your score if you have different types of credit (credit card, line of credit, car loan etc.)

4) Control the number of credit checks

When surveying the market for mortgage rates, request all quotes within a two-week period. Staying within this timeframe will result in all inquiries being combined and treated as a single inquiry for your credit score.

5) Use less than 35% of your available credit

It’s better to have a high credit limit and use proportionately less of it each month. While some individuals may prefer a lower credit limit to help control spending, it will result in a higher credit usage rate.

Business Owners

The most overlooked area of financial planning for business owners and incorporated professionals is the lack of integration between corporate and personal assets. When the majority of your assets are in your corporation you need very specific, specialized and personalized financial advice.

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