How to Improve Credit Score Canada? – Proven Strategies That Deliver Results
What are the benefits of a good credit score? It unlocks the freedom of choice with your finances. You can avail of new loans at reduced rates. Get top credit cards with higher rewards. In short, it opens doors to more financial choices and opportunities. How to improve credit score Canada? Let us discuss the proven strategies to enhance your credit score.
Keep Tabs on Your Payment History
Nothing gains more prominence than your payment history in your credit report. It can make or break your score. Don’t postpone a payment even if it is in dispute. Make timely payments no matter what happens.
Are you struggling to make the full payment? Then, focus on making at least the minimum payment. If you cannot make even the minimum due, contact the lender and get an extension date if possible.
Use Electronic Alert Feature
Today, financial institutions send electronic alerts when the available credit drops below a specified limit. Use this feature to get alerts or notifications to manage your credit payments more responsibly.
Responsible and Wise Credit Utilization
Always stay within your credit limit. Your credit score will drop if you borrow more than the specified limit. Check your maximum credit limit. Use only 30% of the available limit. Don’t go beyond this mark. Timely payments will increase your credit limit over time. Then, reduce the credit usage rate to 20%.
Imagine that your credit card comes with a $10,000 limit. If you borrow $3000, your credit usage rate is 30%. As your maximum credit keeps improving, maintain the credit usage rate to 20%. That is to say, you should use less of your maximum credit each month to improve your score.
Limit the Number of Credit Checks or Inquiries
Whenever you apply for a loan, the lender will ask the credit bureau for a report. When the number of credit checks increases, you will be considered a high-risk category borrower. This situation reduces your credit score.
How to limit the number of credit inquiries? Take loans only when needed. It limits the number of applications. Are you searching for a car loan or a mortgage? Use a two-week tenure to receive quotes from various lenders. In such a situation, bureaus will club and consider all your inquiries as a single one.
How do Hard and Soft Inquiries Differ?
Both categories, hard and soft hits, will reflect on your credit report. However, the soft checks are visible only to you. Therefore, they don’t interfere with your credit score. On the contrary, hard hits are visible to everyone who accesses your credit report. In addition, they make an impact on your score.
Soft inquiries occur when:
– You check your credit report
– Businesses assess your credit report to amend your records relating to a current account you have with them
Hard inquiries occur when you submit:
– Applications for credit cards
– Certain job applications
– Specific rental applications
Focus on Credit Diversification
Maintaining one type of credit does not improve your credit score. Combine different types of credit, including a credit card, a line of credit, a car loan, and a home loan. Diversification is a wise choice to improve your score only if you make timely repayments.
How to improve credit score Canada? These are the most effective methods you can employ to make your credit score better. Monitor the credit history and use credit wisely. Limit the credit application and diversify the credit to achieve the best results.