8 Tips to Help You Keep a Healthy Credit Score

You apply for a mortgage, car loan, business loan, or credit to make a significant purchase. The first thing the lender does is check your credit score, a number that indicates your capacity to repay the loan. Lenders use them to determine who qualifies for a loan, at what interest rate, and to what limit.

 

Scores in Canada typically range from 300 to 850. Good scores are 660 and higher, and anything over 760 is considered excellent. Here are some ways to help you keep yours toward the top end.

 

  1. Pay all your bills on time.

Try to make at least the minimum payment on time. Tell your credit provider in advance if you can’t make a payment. They may be able to adjust your repayment terms to more manageable levels. This will appear on your report and may or may not affect your score.

 

  1. Keep your credit card balances low.

The rule of thumb is about 30% of your combined credit card limits. Card issuers typically report balances when your billing month closes, so it’s a good idea to get under 30% before then.

 

  1. Don’t close old cards.

Lenders look at the percentage of your total available credit that you’re using on all cards. An unused card keeps your total limit higher, so the amount owed on other cards represents a lower percentage of overall credit available.

 

  1. Manage your overall debt.

Credit cards, loan balances or lines of credit drive up your overall debt. As a general rule, it’s a good plan to keep your monthly debt payments and bills below 35- 40% of your gross monthly income.

 

  1. Set up automatic payments.

This is the best way to avoid missed or late payments.

 

  1. Avoid applying for credit from too many lenders.

Every inquiry affects your score. Too many inquiries in a short time may make lenders suspicious that you’re overextended.

 

  1. Do whatever you possibly can to avoid defaulting on a loan.

This is an obvious one—it can cause serious and lasting damage to your score.

 

  1. Check your credit status yearly.

It’s important to know where you stand and make adjustments if your score is low. Report any incorrect information, including date of birth, social insurance number, errors in your payment history, or unauthorized inquiries. These may be evidence of identity theft.

 

Credit is an essential part of our lives when it comes to things like buying a home or a practice. On the other hand, if misused, a bad credit score can haunt you for a long time, so it pays to stay vigilant.

 

Keeping a healthy credit score goes hand-in-hand with maintaining overall financial health. To help achieve this, you can contact one of our Investment Planning Advisors* for a complimentary investment review.

 

Sources: TransUnion, DebtCanada, Government of Canada

 

* Advisory services are provided by licensed advisors at CDSPI Advisory Services Inc. Restrictions may apply to advisory services in certain jurisdictions.