Chances are that if you’re reading this post, your credit score might be lower than average, or maybe it’s bad. Or maybe you’re not quite sure where your credit score lands on the scale? Either way, it’s always a great resolution to learn more about your credit history, get your up-to-date credit score, and take steps to improve your credit score quickly and easy.
- What is the average Canadian credit score
- How to check your credit score
- How to increase your credit score fast
- Add to your credit history
- Pay your bills on time to improve your payment history
- Utilize your available credit wisely
- Reach below the 30% mark of outstanding debt
- Pay bills and balances in full
- Avoid grace periods
- Be budget conscious
- Don’t apply for multiple loans
- Eliminate small balances on a handful of credit cards
- Add some variety to your credit
- Take on some “good” debt, like a car loan
- Leave old, good debt on your credit history
What is the average Canadian credit score?
Credit scores – also known as a FICO score – range between 350-900 points. With 900 indicating your credit is spotless, 680 is around average, and anything under 500 is considered bad credit, or a risk for lenders.
Learn more about credit scores
You can learn more about credit report and score basics on the Government of Canada website.
To improve your credit score, the first step is to find out what your credit score actually is.
How to check your credit score
In Canada, you can request your credit score for free from credit bureaus Equifax Canada or TransUnion Canada via mail. If you want to expedite this process, for less than $20 you can request your credit score online from either of these credit reporting agencies.
How to increase your credit score fast
The good news is that there are many ways to help build and improve your credit score. There may not be a magical solution to repair your credit score overnight, but you can take steps to improve your credit score within 6 months or even 30 days. The following 12 tips are approachable changes you can make to easily improve your credit score.
Add to your credit history
Your credit history indicates how long you’ve had credit or have been paying bills. If you’re a new Canadian or young adult, you might have little-to-no credit history, and therefore have a poor credit rating. As you make monthly payments, like your cell phone bill or rent, you’ll build up a history. So, ensure you’re paying these items on time.
Pay your bills on time to improve your payment history
You can’t change your credit history, but you can improve it, while also improving your credit score. The biggest component that accounts for 35% of your credit score is whether you pay your bills or installments on time. A great idea is to set up calendar reminders for bills, or set automatic payments for recurring payments, such as your cable bill.
Utilize your available credit wisely
The percentage of available credit you’re using, known as credit utilization, accounts for nearly a third of your credit score. Because your credit utilization plays such a large role, it can actually help to raise your credit score by 100 points in less than 6 months. Aim to use way less than 30% of your available credit – or you can even open a credit card and not have a balance on it – to boost your score.
Reach below the 30% mark of outstanding debt
The sooner you pay off your debt, the sooner you’ll improve your credit score. Realistically, if you can’t pay everything off, reaching 30% or less of what you owe will help boost your credit score.
Pay bills and balances in full
Your credit report shows whether you make payments in full, contributing to your overall credit score. Only paying the minimum $10 payment toward your credit card balance might be tempting, but don’t fall into that trap! Make it a priority to not only pay bills and balances on time, but also pay in full.
Avoid grace periods
Similar to only paying the minimum balance on your credit card, taking an extension on payments can be alluring – using grace periods and extensions won’t help raise your credit score.
Be budget conscious and keep your debt down
How much debt you carry, especially on credit cards, not “good” debt like a mortgage, negatively impacts your credit score. Do you really need that new pair of shoes? Making savvier spending choices – or maybe even going on a spending strike – can keep balances on your credit cards down, keeping your debt in check.
Don’t apply for multiple loans
Only apply for credit that you truly need. Shopping around and applying for multiple loans over an extended period of time could negatively impact your credit score. Additionally, applying for an another credit card, or multiple credit cards, can also lower your credit score.
Eliminate small balances on a handful of credit cards
It’s not always a good idea to get that department store credit card. Having multiple cards, even with small balances like $50, can negatively impact your credit score. Close cards that you don’t need, or pay those with small balances off immediately.
Add some variety to your credit
Your credit mix accounts for 10% of your credit rating. If you haven’t had varied types of credit – mortgage, student loan, credit card, etc – your score will be lower. An easy way to add variety to your credit mix is take on some “good” debt. (See next tip!)
Take on some “good” debt, like a car loan
Not all debt is equal. Certain debt can actually help you boost your credit rating. Take the right steps and a car loan can be a great way to boost your credit score. First, ensure the car you have in mind and your loan payments easily fit into your budget. Secondly, by making your loan payments on time and in full, you are adding beneficial records to your credit history. And because your car payments are set installments, not revolving credit like a Visa or MasterCard, there’s no wiggle room to rack up more debt than what you started with. Plus, compared to other higher interest loans, auto loans are a lower cost, with installments over a shorter period of time.
Leave old, good debt on your credit history
It might be tempting to try and erase all debt from your credit record. However, you can’t start to increase your credit score if you don’t have any credit history. Debt that you’ve paid off or open loans without a balance, or less than 30% of credit used, shows that you have a track record of being financially responsible.
Can you pay to get your credit score higher?
There are some things that money can’t buy, and a higher credit score is one of those things. Fortunately, there are ways to use your money wisely that can boost your credit score. For example, paying all bills and installments in full and one time, will improve your credit record and therefore your credit score. Paying off high interest revolving credit – i.e. credit cards – can also help boost your score.
How long does it take to improve your credit score?
It’s possible to improve your credit score in as little as 30 days – it just depends where you’re starting at. The lower your credit score, the more time it’ll take to boost. Don’t be discouraged, though! The following three tips are solutions that can help you raise your score fast – pay bills on time and in full, utilize your available credit wisely, and reach below the 30% mark of outstanding debt.
While anything important and worthwhile – like improving your credit score – doesn’t happen overnight, the tips in this article can easily help you raise your credit score as quickly as possible. Starting with one credit score building tip, and building up momentum as you go, is a great way to create positive financial habits. While you’re working to improve your credit score, know that you’re eligible to get a car loan, even if your credit is less than perfect. So, if you’re ready to get on the road, now’s the time to apply for a RightRide auto loan.