Having access to credit isn’t just a fundamental part of how society functions, it’s a requirement for a huge number of important financial milestones. Mortgage, car loan, student loan, you name it: a good credit score is your key to tapping into borrowed money.
So how do you actually obtain a good credit score? Keep reading to learn how to become a credit super star and stay on top of your finances.
Check Your Score at Least Once a Year
All lenders/financial institutions report your spending and repayment habits to two credit bureaus in Canada – Equifax and TransUnion. In theory, your credit report and score should be the same with both bureaus. In reality, errors happen and even one mistake can seriously affect your score.
Order your credit report (from both bureaus) at least once a year to check for any errors, omissions, or falsehoods. The sooner you can get the mistakes fixed, the sooner your credit score will bounce back to where it should be (and the sooner it will be an accurate reflection of your financial history).
Pay Off and Pay Down as Much Debt as You Can
Most people have more than one credit account open. Whether it’s credit cards, loans, or lines of credit isn’t particularly relevant; what does matter is your repayment history and how much debt you’ve accrued.
Look over all of the open accounts you have, find out how much money you owe on each, and try to pay down and pay off as much of that debt as you can. If you have a number of credit cards with a balance on them, try rolling some of your debt over into the account with the lowest interest rate (or consider opening a new account with an even lower interest rate to help reduce how much you’ll be paying back in accrued interest charges).
Don’t Close Old Accounts
That being said, once you’ve completely paid off an account – don’t close it. Leaving the account open is actually better for your credit score in the long run than just wiping it off of your credit report. If you’re worried about being tempted to run charges up on it again, you can always cut your credit card in two and leave the account open in name only.
Don’t Spend More than You Earn
Knowing you have access to credit can be a great quick fix when you’re feeling the pinch in your wallet just before payday but it’s not the end all, be all solution you might think it is. It’s okay to use credit to tide yourself over so long as you know you’ll be able to pay it back. Don’t spend more than you earn and don’t spend money that you can’t guarantee you won’t be able to pay back.
Change Your Mindset
One of the hardest but most worthwhile things you can do is to change your mindset about credit. Remind yourself that the money you’re borrowing isn’t yours and that credit is a privilege rather than an extension of your own income. Everything you buy on credit is borrowed from someone else and will have to be paid back. Credit has many incredible benefits (from giving you peace of mind when shopping online to earning reward points) but at the end of the day it’s not your money and your bank will expect you to pay back every cent (and more) in time.
Need extra help attaining a good credit score? We can help!