1. You may be a great credit risk but your score won't reflect that if there are errors in your credit report. The last thing you need is to have someone else's delinquencies assigned to you.
Or, you may think you have great credit, but don't realize that your spouse has been hiding debt from you and killing your score in the meantime. What you need to do is to make yoursself aware of what is in your credit report a few months before applying for a loan. You have no idea how a lender will perceive you, rightly or wrongly, by knowing in advance where you stand credit report wise, you now have the opportunity to improve your score.
TO BOOST YOUR SCORE: Order a free credit report once a year from each of the Credit bureaus and make sure they're accurate. Log on to www.freecreditreport.ca or www.freecreditscores.ca or by calling 1-877-322-8228
2. The bigger your balance is relative to your credit limit, the lower your score. While it may be tempting to close out a credit card account when you transfer the balance to a lower rate card you may inadvertently hurt your score. That's because your total balance stays the same but your credit limit goes down when you close an account .
If you have three credit cards with a combined credit limit of $24000.00 ($8,000.00 each) and you owe $6000.00 total, your blance represents 25% of your credit limit. If you close out one of your accounts, your credit limit now drops to $16000.00 but your debt is still $6000.00 which now represents 37.5% of your credit limit.
TO BOOST YOUR SCORE: Don't close unused accounts when you transfer debts.
3. Old credit accounts count more than young ones in your credit score.
Lenders prefer borrowers who have responsibly managed the same accounts for years. This represents a more reliable indicator of creditworthiness than a few months of exemplary behavior on a new account. Accounts opened less than a few months will hurt your scores somewhat, those opened six months or more won't ,while those opened for at least two years will help your score.
Every time you apply for new credit, your score may be impacted by 5 points, however, if a BROKER shops around for you, they can approach multiple lenders who all pull your credit report and that will count as one enquiry, so long as they all do so within a two-week window.
TO BOOST YOUR SCORE; Avoid applying on your own for a lot of credit cards particularly in a short period. Avoid excessive card hopping.
4. When it comes to credit, fat is good, emaciated is bad. Even if you're the most responsible, on time, in full billpayer on the planet your credit score will not be as high as it could be if you just have one credit account.
THE REASON: Your credit profile is too thin and lenders ideally like to see a potential borrower responsibly managing a mix of revolving debt (such as a car loan or mortgage where you pay the same amount every month for a certain period).
TO BOOST YOUR SCORE: Consider opening another credit card account or two or taking out a car loan or small bank loan.
5. Sending in your loan or credit card payments late can really hurt. When you're 30 days past due and your balance is still unpaid, your score could take a 60 point hit. That kind of drop could mean a much higher rate on loans you take out. Late payments from your past will have less and less of a negative impact as time goes on. On average delinquencies that have been resolved might cost you 15 to 20 points.
TO BOOST YOUR SCORE: Pay your bill in full and mail it on line or via Canada Post as soon as it arrives or at the very least pay the minimum due. Set up an automatic on-line payment option so that you'll never be late. If you are late one month be sure to pay off what you owe as soon as possible.
6. The bigger your total balance as a percentage of your total credit limit across all your credit cards the lower your score will be. Example, if you have a total credit limit of $10,000.00 and an outstanding balance of $4000.00 (40%) your score would be 40 points lower than if you had a zero balance. Credit scores range from 300-850 the higher the better. Anything above 760 being most desirable. Credit experts say you would never want your balance to exceed 30% of your credit limit.
TO BOOST YOUR CREDIT SCORE: Never charge anything before applying for a loan, this way all repayments made should be reflected in your credit score by the time the Lender requests it. If you can't pay off your total balance in full keep it at least 30% of your credit limit
COMPOSITION OF CREDIT SCORES
35% Is Based on Previous Credit Performance
30% is Based on Current Level of Indebtedness
15% Is Based on Time Credit has been in use.
15% Is based on Typed of Credit Available
5% Is Based on Pursuit of New Credit
SYMBOLS ON CREDIT BUREAU REPORT
R = Revolving Debt
I = Installment
R-0 - I-0 No Credit History
R-1 - I-1 Debts repaid within one (1) month
R-2 - I-2 Debts repaid within two (2) months
R-3 - I-3 Debts repaid winin three (3) months
R-4 - I-4 Debts repaid within four (4) months
R-5 - I-5 Debts Not paid in four (4) months but not yet rated "9"
R-7 - I-7 Debt Repayment under consolidation (Credit Counselling)
R-8 - I-8 Debts were cleared by selling off item (Repossession)
R-9 - I-9 Extreme bad debt - uncollectible - Written Off - Precursor to Bankruptcy.
