Improving Your Credit Score

Improving your credit score is vital, especially when you are looking for lenders to extend credit such as lines of credit or mortgages. They also determine your risk, therefore, the interest rate you will receive on credit products. A poor credit score can cost you thousands of dollars in interest charges!

Here are some tips that will help you improve your credit score.

1. Pay on time. While this might seem obvious, this makes up a large portion of your credit score. Ensure payments are made before the due date. Remember that bank payments can take 3-5 days to arrive depending on your bank. Also, be aware while most utility companies do not typically report your credit history, some cell phone companies do report late payments, which will affect your score.

2. Pay in full/minimums. Try to pay your bills in full where possible. If you cannot pay the full amount, ensure you are paying at least the minimum amount.

3. Don't go over the limit. Going over your credit limit is extremely detrimental to your credit score. While this can be repaired simply by bringing your card below it's limit, in the short term, your 'Credit Utilization', a factor used in scoring, will exceed 100% showing potential lenders you are a high risk and are living beyond your means. Your debt to credit ratio can make up to 30% of your credit score. Most financial institutions also impose 'overlimit fees' that can range from $20-$50 which can make a bad situation worse if you are having financial difficulty.

4. Don't apply for credit in excess. While promotional deals for signing up for a new card might be tempting, multiple credit inquiries in a short period of time may have a negative impact on your score and you may appear as 'credit hungry'. Don't apply for new credit on impulse but take the time to think out whether it will add value and if you will be able to pay it off.

5. Check your credit history. Order your credit report every 6 months to 1 year so you can verify the accuracy of what is in the report. The major credit reporting agencies (TransUnion, Equifax, and Experian in the US only) allow for one free credit report per year. This is requested through written request. Requesting your credit file does not impact your credit score. If you find something in the report that is incorrect, each agency has a process to allow you to dispute the entry. Checking your credit history also helps prevent fraud.

6. Beware of credit repair agencies. While some credit repair agencies provide great information others make promises they cannot keep. Here is what you need to know:

• A credit bureau will not remove accurate negative information from your credit report until the legal time period has passed (will depend on province/state). Be cautious of companies claiming they can have items removed faster.
• No credit repair agency can do anything you cannot do yourself.
• The only way for you to repair your credit score is for you to use credit responsibly.

For information on the credit reporting agencies, please visit http://www.equifax.ca, http://www.transunion.ca. In the US, visit http://www.equifax.com, http://www.transunion.com, and http://www.experian.com.

Kevin is a financial services representative from Toronto, Canada. For information about his agency, please visit http://www.financialsolutionsnow.ca.