Tips & Advice

10 Ways to Improve Your Credit Score

Is it a coincidence that credit scores are a bit like credit cards? It can be easy to lose control over them, and once you do, it can be hard to course-correct. But don’t lose hope! With some time and a little effort, it can be done.

Here are 10 things you can do that can help give your credit score a lift, with a few pitfalls to avoid along the way.

1. Check your credit report for errors.

Removing errors from your credit report can be a time-consuming (but necessary) process. You’ll need to contact the credit bureaus, Equifax and TransUnion, and complete their process for correcting inaccurate information. You can also contact your creditors directly regarding any errors related to the accounts you have with them; if they respond in your favour, ask them to contact the credit bureaus to make the appropriate corrections on your credit report, and be sure to get documentation for yourself whenever possible. The Government of Canada provides more information about correcting errors if you do find them on your credit report.

2. Set up automatic payments/payment reminders.

We lead hectic lives, and missing a payment is an easy thing to do that can really take a toll on your credit score. Avoid this by setting up automatic payments with your creditors that deduct directly from your bank account. If you’re concerned about having money pulled from your chequing or savings account automatically, some creditors will email or text you reminders if you opt-in, or you can just set up reminder notices on your mobile device without having the funds pulled directly from your account.

3. Start reducing your debt.

Easier said than done, you might be thinking. True, but it’s also the one surefire way to start boosting your score! There are a number of different approaches you can take, including the snowball and avalanche methods, which you can learn more about here. But if you’re trying to get a loan or a mortgage (two reasons why most people want to raise their score), you may also want to consider dipping into your savings to pay off those debts a lot faster. FYI, savings don’t count towards your credit score, so they won’t help you acquire a loan, other than to put down a down-payment.

4. Pay off debts in good standing.

Focus on these debts first rather than accounts that have already gone into collections. Unfortunately, accounts in collection have already made their mark on your credit score, and even after you’ve paid them off they will remain on your report for seven years. Paying off a dormant account in collections can also reactivate it, hurting you even further. So, it’s best to put your money toward the accounts that can help you look better, quicker.

5. Keep unused credit cards open.

Many people make the mistake of thinking fewer cards equals higher scores. So, they’ll close out cards with zero balances (or pay off a card and then close it). However, it actually helps to have unused credit because it improves your credit utilization rate. Credit utilization is the amount of credit you have available versus the amount you’re using. Showing unused credit decreases your utilization percentage, and that’s good news for your credit score!

6. Move some money around.

30 percent credit card utilization—that’s the magic number you should be at (or under) when it comes to your total credit card utilization for all your credit cards. However, some credit reporting agencies will look at each of your cards individually to make sure they are each under 30 percent. So, if you have one credit card that’s maxed out but another with a zero balance, you may want to consider transferring some of that debt over to the empty card—but only if you have the same APR for both cards.

7. Become someone’s authorized user.

If you have a trusted friend or family member with a solid credit history and score, see if they’ll consider adding you to a few of their cards as an authorized user. They are of course not giving you a card, they are simply letting you soak up some of their credit score goodness to improve your score (in time, they can remove you once you’ve made significant improvements). Again, be certain they’re history and habits are good, because a blemish on their record will become a blemish on yours.

8. Take out a secured credit card.

Secured credit cards are a good way to build, or rebuild, your credit. You’ll want to find one with no annual fee and you’ll generally need to set it up by depositing $300-$500. Use it for a small purchase or two and then PAY IT OFF. Repeat this process again and again, and eventually this information will hit your credit report and show regular payment responsibility.

9. Avoid behaviour that makes you look “risky.”

Raising your score may simply be a matter of avoiding behaviour that lowers it! This could include showing signs that you’re strapped financially, like frequent cash advances (these are a no-no anyway due to the extremely high interest rates), or multiple credit inquiries from potential lenders within a relatively short amount of time.

10. Avoid credit repair scams.

You’ve probably seen websites and ads from so-called credit repair companies claiming they can wave their wand and poof! make your credit score woes disappear. You’ve probably also heard the old adage, “If it seems to good to be true, it probably is.” There are a lot of con artists out there looking to make money off people desperate to improve their credit score—don’t fall for it! Credit building takes time, and it’s unlikely anyone can fix it for you without effort on your part. If a credit repair company tries to convince you to take out a “loan” to improve your credit score, run.

Good luck on your credit score building journey! As mentioned, it may take some patience and some due diligence, but it can be done. Also, don’t be afraid to check your credit score from time-to-time to monitor your progress; despite persistent myths, simply checking your own credit, also known as a soft inquiry, does not lower your score. If you have questions, concerns, or would like to speak with a certified credit counsellor, contact our team at Credit Canada, we are always here to help!


About Josie D’Addario

Josie is a certified credit counsellor and financial coach for Credit Canada Debt Solutions – Canada’s first and longest-standing non-profit credit and debt counselling agency. Josie has nearly 20 years experience working with clients one-on-one, helping them eliminate debt, improve their credit, and achieve their financial goals through expert advice and no-nonsense money management.