If you want to improve your credit score, it’s important to define realistic and achievable goals with actions you’ll follow through on. While there is no quick fix for a score-in-trouble, there are some short-term and long-term strategies that you can employ to improve your score and get on the right financial track.

You need to determine what your goals are and what the timeline looks like. Be realistic. For example, if you’re swimming in credit card debt and barely making the minimum payments on time, your score won’t go from bad to good overnight. 

However, it is realistic to plan for a score increase of 5-10 points every few weeks, so long as you know what to do stick to the plan.

But first thing’s first, you need to know what your credit score is first, and where you can find your credit report…

Get Your Free Credit Report & Credit Score

Did you know that you can download a copy of your credit report and your credit score for free? The folks at Borrowell can set you up with a credit monitoring account. Simply sign up with a few quick details and you’ll be examining your credit report within a few minutes!

Check Your Credit Report for Errors!

If you noticed errors or fraud on your report, that is your priority before anything else. Correcting credit report errors can increase your score in large increments, but only if you take action. Well, you can ignore the errors and they may go away after 5, 6, or 7 years, but do you really want to wait that long?

You’ll need evidence of fraud or errors on the report. Get your documentation in order first, and give the bureaus a “scouting call” to determine what their process is to correct credit error mistakes. 

As you continue to improve your credit history and your score, make sure to check for errors regularly. Fraud, unfortunately, is a common-enough occurrence that it should be part of your financial health check. Experts say checking your credit once or twice a year for fraud is a good idea.

What Is a Good Credit Score?

660 and above are considered good. Anything above 660 points is considered a good (660 to 725), very good (725 to 760), or excellent (760 to 900) credit score. Anything below 660 is considered fair (560 to 660), or poor (300 to 560). If you fall into this poor range, your journey to great credit may take a bit longer, but you’ll get there. Educating yourself is the first step to credit success, and that’s why we’re here to give you a headstart!

Credit Scores in canada range from 300 to 900, with 660 and above considered good.

What Factors Affect Your Credit Score? 

Your FICO score is calculated using a combination of components, and understanding the different weights allocated to each of the five components can help you focus on where you need to improve.

    • Payment history: Payment history makes up 35% of your credit score, making it the most important factor be mindful of. Monthly payments of revolving loans and installments loans are monitored and tracked by the credit bureaus. Borrowers can avoid seeing their credit scores dinged by making on-time payments without fail.
    • Credit utilization: 30% of your credit score is based on credit utilization (i.e. how much credit you have versus how much credit you’re currently using.) Your total balances on all lines of credit are measured against your total credit limits to give you your credit utilization ratio. As a rule of thumb, borrowers can maintain a good credit utilization ratio by keeping their balances at 30% of their credit limits. For example, if you have a credit card with a limit of $1,000, you should try to keep your balance under $300. Anything more than that could be detrimental to your credit rating.
    • Length of credit history: 15% if your credit score is based on the length of your credit history. That’s why it’s so important to establish credit as early as possible. A long credit history gives credit bureaus a better idea of your financial behaviour. Therefore, rather than close credit card accounts, it might be a better idea to keep them open and just cut up the cards so that you’re not tempted to use them. 
    • New credit: Counting for 10% of your credit score, opening a new line of credit can actually harm your credit score as it lowers your average account age. New accounts should only be opened when needed.
    • Credit mix: A healthy combination of installment loans and revolving credit counts for 10% of your credit score. If you can regularly repay a variety of debt products promptly and on time, credit bureaus tend to view you as low risk. 

    factors that impact your FICO score

    How to Improve Your Credit Score

    Your credit score is not a static number. It can go up or down depending on your financial behaviour. Here are a few tips on how you can improve your credit score...

    1. Keep Your Credit Cards but Don't Use Them

    Credit cards are great tools for improving credit, but only if you’re able to control your spending. If your credit utilization is too high, then consider not using them at all.

    If you have credit cards that you don’t really use, don’t close them. If you’re tempted to use them, simply cut up the cards or lock them away somewhere and don’t carry them with you. 

    The older a credit account is, the better it is for your score, especially if there is little-to-no balance on it. Usage of under 30% per month, and paying it off every month, is considered ideal by the industry. That doesn’t mean you should start opening a bunch of new credit card accounts just so you can not use them. This will have a negative effect on your score since you’re effectively shortening the average age of your credit history.

    You should reduce your reliance on credit cards as much as possible. If you’re able to cut down on what you put on your credit card, even by half, then do so. Unless you’re lucky with a very low interest rate, you’re just bleeding cash due to interest. 

    Pro tip: Start paying down your highest interest rate card first while maintaining the minimum balance on the others.

    If possible, using balance transfer cards lets you transition from a high-interest card (eg: 24%) to a lower interest card (eg: 14%) with ease. 

    Please Note: this is only beneficial if there is no fee for the balance transfer.

    2. Don’t Miss a Payment!

    If your bills are falling at times of the month that makes it hard to keep up with, call your credit card companies, hydro company, or cellular provider and ask if they’re willing to work out a better date for your bill to be paid. 

    Why does this matter?

    Payment history has the greatest impact on your credit score calculation - it’s 35% of it!

    Sometimes, all it takes is a little time to see where your money is going and small tweaks to make sure you’re on time, every time. For example, if you know you have 50% of your paycheck going to all of your bills in one pay period, that may help you budget a bit more efficiently.

    If you have missed a payment, try to catch up as soon as possible. The longer it goes on, the worse the impact will be on your credit rating. Most credit card companies give a 30-day grace period before reporting to the credit bureaus. 

    Pro Tip: If you think you might miss a payment, call them in advance to make an arrangement. It shows you’re responsible and trying to make it work.

    The temptation may be to just ignore doing these things but being proactive can help prevent further damage to your credit score.

    Lastly, if you are truly concerned about remembering to make payments on time, then set up PAD’s (pre-authorized debit) where possible. Now your bill payments are automated so you don’t even have to think about it!

    3. Apply for Credit

    Since too many lender inquiries can be damaging to your credit score, it's recommended that you're thoughtful and selective about applying for credit. But taking out the right kind of loan can help you prove to lenders and credit bureaus that you’re responsible and capable of paying your debts. Making regular payments on personal loans is a great way to started building or rebuilding credit, and an unsecured installment loan gives you the freedom to use the loan where you need to the most.

    Fresh Start Finance can help!

    With personal loans of up to $15,000 and payment periods of up to 60 months, Fresh Start Finance can help you on your journey to financial well-being.

    Do Loans Help Build Credit?

    Here are some other loans that can help you build credit:

    • Debt Consolidation Loans improve your credit rating by decreasing credit utilization. You can use our loans for debt consolidation by lumping all of your debts into one monthly (bi-weekly or weekly) payment. It’s more for ease of repayment, and, if used correctly, possibly even saving interest!
    • Auto Loans are loans designed specifically for vehicle purchases. On-time payments help your credit score and the type of loan itself shows variety in your credit history. It may not be revolving credit, but it still counts significantly! Canada Drives specializes in auto loans for people facing all types of credit situations.
    • Credit-Building Secured Loans are ideal if your credit is severely damaged and you can’t get approved for a new line of credit like the ones mentioned above. Credit repair companies can help you get your finances back on track. When you apply and are approved for a credit builder loan, every time you make a payment on time means good things for your credit score.

    What is a Credit Builder Loan?

    If you have a very bad credit score, the best way to rebuild it is by making on-time repayments on a loan. But with very bad credit, it can be almost impossible to get approved for a loan. Hence, you’re stuck in your bad credit situation. But there is a way out of this frustrating conundrum—it’s called a credit builder loan.

    A credit builder loan is not a typical loan. Think of it more as a saving strategy to help you build credit. With a credit builder loan, the money you “borrow” is locked in an account by the lender. You then commit to paying off the loan. You do not have access to these funds until the full amount is paid off. Once you pay all instalments on time and in full, you’ll receive a lump sum to the full amount AND your credit score will improve!

    Contact us to learn more about secured savings loans and credit cards.