If lenders want to predict your creditworthiness or decide whether to lend you money or not, they look at your credit score. In fact, how much they will lend you and how much interest they will charge you is also dependent on your credit score. This is why it’s important to prioritise boosting your credit score this year and get better deals when you need money.

What is a Credit Score?

Your credit score has three digits, and it ranges from 300 to 900 in Canada. Your credit score announces who you are financially, and it hardly lies. It tells lenders how responsible you are with money. The higher your score, the more trustworthy you appear to lenders.

The impact of a credit score has gone beyond just borrowing. Employers, landlords, and even insurance companies might peek at your score. So, it’s not just about loans and credit cards anymore. Your score can affect many areas of your life. But don’t worry, boosting your credit score isn’t a mystery. You can have a high credit score too if you start doing some things and are patient. Let’s move on. 

The Credit Bureaus in Canada

The two major credit bureaus in Canada are Equifax and TransUnion. They are the ones that write your credit reports, and lenders can have access to your score through them.

Equifax Credit Scoring

Equifax calculates your credit score based on payment history, amount of debt, length of credit history, new credit inquiries, and types of credit used. The score they provide is often used by lenders to determine your creditworthiness. What makes Equifax unique is its slight emphasis on the depth of your credit history and the mix of credit types you manage.

TransUnion Credit Scoring

TransUnion, on the other hand, also looks at your payment history, debt levels, duration of credit history, new credit inquiries, and credit mix. However, TransUnion might give more weight to your recent credit activity. 

Despite these differences, both scores are generally in the same range.

Key Strategies for Boosting Your Credit Score

Improving your credit is a long-life journey, it never ends. If your credit score is high today, if you make some mistakes months later, it could drop. So you just have to keep going. There’s no one that can’t build his credit score from the ground up. Let’s look at some strategies you can use to boost your credit score in 2024.

On-time Payments

If you ask what the most important practice in boosting your credit score is, paying your bills as and when due is probably the most important. Late payments will drag your credit score down. To avoid missing payments. You can do the following;

• Set up automatic payments for recurring bills.
• Use calendar reminders for due dates.
• Always aim to pay at least the minimum amount due, though paying in full is better.

Credit Utilization Ratio

If the amount of credit available to you is $5000, how much you take out of that determines your credit utilisation ratio. Just because your lender gives you a $5000 credit limit doesn’t mean you should take out everything, it’s a trap, so don’t fall for it. Your credit utilisation ratio should be around 30%, that is, if you are provided with a limit of $5000, you should not take out more than $1,500. If your utilisation ratio is too high, lenders will interpret it differently. They will think you’re too reliant on credit.

Diversifying Credit Accounts

Having different types of credit accounts is also a good strategy when it comes to boosting your credit score. You should aim to have a mix of credit that includes credit cards, car loans, and mortgages. This diversity shows lenders that you can manage various types of credit responsibly. However, it’s important not to open new accounts just to increase your mix of credit types, as this can lead to hard inquiries and higher debt levels. 

Debt Management

If you can manage your debt well, your credit score will start to improve right before your eyes. It’s not just about how much you owe, but how you handle what you owe. 

• Prioritise paying off high-interest debts first, so you can save on interest in the long run.
• You may also choose to pay off smaller debts first to gain motivation.
• You can consider debt consolidation if you have multiple high-interest debts. This can simplify payments and may reduce your interest rate.

Checking Your Credit Report

Your credit report might contain errors that can affect your score. Checking it once in a while is a good idea.

• Obtain your credit report from both Equifax and TransUnion. You can get it for free annually from both bureaus.
• Review your report for errors like wrong personal information, incorrect account details, or transactions you didn’t initiate.
• If you find errors, report them immediately to the credit bureau.

Keeping a close eye on your credit report and score means you’re taking proactive steps to maintain or improve your credit standing. You could be doing everything right yet there’s an error dragging your credit score down. You have to be in control.

Conclusion

If you have multiple debts you are struggling to manage, you are probably experiencing a low credit score already. How about you kick that burden off you? Your debt can be reduced by up to 80%, and interest will stop immediately. Speak with one of our debt experts at EmpireOne Credit to get personalised counselling. We offer a free, friendly, and non-judgmental consultation. Call us at (416) 900-2324 to schedule a free consultation with us. Being debt-free feels good!