Are you struggling with a low credit score? Poor credit can lead to higher interest rates, getting rejected for a loan, a mortgage, or a rental application, and other undesirable outcomes. Discover seven smart tips to improve your credit score!
Benefits of a Good Credit Score
These are just some of the benefits of a good credit score:
- A higher chance of getting approved for a mortgage
- You may be offered a lower interest rate on a loan
- Higher chances of having your rental application approved
- Easier to get approved for a personal loan
- In some cases, a good credit score can help you get hired
There are many reasons why a good credit score is highly desirable. Here are our seven smart tips to achieve a better credit score.
Tip #1: Understand Your Credit Score
In Canada, a good credit score will generally be above 660. Scores 760 and above are considered excellent. It has been reported that the average Canadian has a score of 650. Factors that negatively impact your credit score include missed or late payments, a high amount of outstanding debt, taking out too many loans at once, and a short credit history.
A perfect credit score is rare and not, strictly speaking, necessary for most of your financial goals. An excellent credit score, which would be anything above 760, will open many doors for you. It will be easier to get more favourable terms on your loans or even get approved in the first place. A good credit score will also be sufficient for most needs. If your credit score is low, understanding the factors that have impacted it is the first step to improving it. Making your payments reliably, reducing your debt, refraining from taking out too many loans, and a long credit history are positive factors that would tend to raise your credit score.
Tip #2: Pay Off Your Debt
Paying off your debts is a surefire way to improve your credit score. Having many unpaid debts not only causes you stress and headaches, but it also negatively affects your credit score. Of course, it can often be easier said than done. If you’re having trouble paying off your debt, you may wish to consider debt consolidation. When you consolidate your debts, you may end up paying a lower interest rate and making smaller monthly payments, which will make your debt easier to manage. You will only be paying one lender instead of worrying about several creditors at once.
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Tip #3: Maintain Low Credit Card Balances
Maintaining a low credit card balance can help you achieve a better credit score. Ideally, you would fully pay off your credit card balance every single month. Only making the minimum payment on your credit card each month can result in a lower score and lower perceived creditworthiness. Any lenders that you deal with, will likely use bare data as a way to gauge your creditworthiness. While numbers are impersonal, they do reflect, to a considerable extent, your financial behaviour.
Being financially responsible means many things, among them reining in your spending. Living within or, better yet, below your means will ensure that you experience less financial stress in the long run. While debt or poor credit may last a while, they can be overcome with the right approach. Utilizing only a small percentage of your available credit will help you stay on track to your financial goals, so consider where you can reduce your spending or maximize your income. One way to earn some extra cash is with Swagbucks. Simply by filling out surveys online, you could earn gift cards or cashback.
Tip #4: Set Up Automatic Payments
Setting up automatic payments will ensure that you never miss a payment. This will improve your standing with any financial institution. If you do face a lack of funds on the day a payment is due, you may wish to take out a quick loan with a lender in our network. Just fill out an online application here. Otherwise, if you owe a payment to a lender, you may wish to call them and inform them when you are next available to make the payment. If such an arrangement is not possible with the lender, you may also consider overdraft protection, which will cost less, in the long run, than defaulting on payments.
Tip #5: Communicate with Creditors
As discussed above, communication is key. Keep the line of communication open with your creditors and be open to discussing various options for repaying any debts that you may have. If you wish to opt for debt consolidation, communicate your intention to your creditors. If you need more time to make a payment, some creditors may be willing to give you the necessary leeway. Just communicate clearly and honestly with your creditors.
Tip #6: Only Take Out Credit You Need
It’s important not to overextend yourself financially. While it may be tempting to overspend, reducing or restricting your spending will help you reduce your overall levels of financial stress. Only take out the credit you need for items that are necessities or very much needed in your life. Don’t take out multiple credit cards that you don’t need. You run the risk of missing payments, which will result in a lower credit score. Practice financial discipline and cut back on frivolous expenditures. In some cases, a single credit card can be sufficient for most purposes.
Tip #7: Get the Right Credit Card
If you’re facing credit card debt, one strategy is to transfer it to a card with a lower interest rate. It’s even better if the credit card has a balance transfer offer! You could be saving a considerable amount on interest payments each month, resulting in paying off your credit card debt much more quickly.
Alternatively, if you’re an avid traveller or collect many points, a card that earns rewards will, obviously, earn you many extra rewards. In that way, you will be maximizing the benefits of frequent travel, whether it is for work or for pleasure.
Still another priority might be building credit, which means taking out a credit card and paying off the balance each month in a responsible fashion. As long as you’re above the minimum monthly payment, you will optimize for a better credit score all year round.
To Sum Up…
The above seven tips are amazing ways to help raise your credit score. This, in turn, will help you when you apply for loans. It’s important to keep in mind that everyone’s financial journey is unique. If you’re stuck without cash in between paydays, OntarioCASH can connect you with a lender in a flash! Apply online – it can take as little as 60 seconds – and get connected instantly. This may help you in an emergency or if unexpected expenses come up. We don’t check your credit score when you apply. Some lenders may report your payments to credit bureaus. In those cases, making your payments on time is one of the best ways to build good credit over the long run. Financial responsibility is a skill you must practice, like any other. We hope that you’ve found the above tips helpful and informative.
