Have you checked your credit score lately? If not, the time to do so is now. Your credit score plays a critical role in your overall financial health, and with a bad score – or no credit at all – getting a loan or credit card can be tough.
Is being in the 800 credit score club really that important? Find out here.
Knowing your credit score is half the battle; your next step is to take measures to improve it if it needs a boost. While there are several things you can do on your own that can help improve your score, there are professional credit improvement services available that can help.
Read on to find out more about credit scores, credit health, and credit improvement in Charlottetown.
Factors That Affect Your Credit Score
There are several factors that play a key role in the health of your credit score. Many of your daily financial habits affect your score, either positively or negatively.
If you’re looking for credit improvement in Charlottetown, it’s in your best interest to know exactly what you could be doing to impact it. Here are a few important factors that are involved in the calculation of your credit score:
Payment history – Perhaps the most important factor in your credit score is your payment history. Making timely payments on your loans and credit cards is a good thing while missing payments can make your score plummet. Your payment history is the most important factor in calculating credit scores and comprises 35% of your entire score.
Credit utilization – The amount of credit that you use relative to your limit is referred to as your credit utilization. If you max out your credit card and spend close to your credit limit, your credit utilization ratio will be considered high and will have a negative impact on your credit score. It’s recommended to use no more than 30% of your credit limit in order to keep your utilization ratio low and your credit score high.
Length of credit history – Lenders and creditors get an idea of what your credit strength is like based on the length of your credit history. If you have no history of having and using credit, there’s little to base your credit score on. As such, a longer credit history is typically better for your credit score and provides lenders with a better picture of your long-term financial behaviour.
Credit inquiries – Whenever you apply for credit, your credit report will be pulled. These “hard inquiries” will cause your credit score to temporarily dip, so the more credit cards and loans you apply for, the harder your credit score will be hit.
Credit mix – Experts say that having a variety of debt products and managing them effectively shows that you can handle all sorts of credit. If you have a good mix of different types of credit, such as revolving credit and installment loans, this is usually a good thing for your credit score.
What’s Included in a Credit Report?
Lenders and creditors pull your credit report when you apply for new loans in order to get an idea of what you’d be like as a borrower. They want to make sure the people they loan money to are not too risky and will be capable of making payments on time.
But what exactly are they looking for? What is included in a credit report? Here are a few pertinent pieces of information that can be found in this crucial document:
Personal information:
- Name
- Date of birth
- Current and any previous addresses
- Current telephone number
- Social insurance number
- Driver’s license info
- Passport number (if you have one)
- Current and previous employers
Credit history information:
- Credit accounts and transactions
- Cell phone and internet accounts
- Closed accounts as a result of fraud
- NFS
- Bankruptcy
- Judgments
- Liens
- Collections information
- Hard inquiries
- Fraud alerts
- Identity verification
How Long Does Information Stay on Your Credit Report?
Not all the information on your credit report sticks around for the same amount of time:
- Credit accounts that are paid off on time and in good standing: 20 years after the last day they were active
- Loans, credit cards, and lines of credit: 6 years
- Secured loans: 6 years
- NSF: 6 years
- Closed accounts due to fraud: 6 years
- Inquires: 3 years for Equifax, 6 years for TransUnion
- Legal judgments: 7 years
- Collection accounts: 6 years
- Liens: 6 years for Equifax, 5 years for TransUnion
- First bankruptcy: 7 years
- Multiple bankruptcies: 14 years
- Consumer proposals: 3 years
- Debt management program: 3 years for Equifax from the date paid, or 6 years if a debt is not repaid
Looking for some information about Canada’s credit bureaus? Try reading this.
What’s the Difference Between a Hard Pull and a Soft Pull?
As already mentioned, a “hard pull” or “hard inquiry” occurs when a lender or creditor pulls your credit report after you apply for a credit card or loan. This can cause a dip in your score. A “soft pull,” on the other hand, occurs when you pull your own report, and shouldn’t have a negative impact on your credit score.
Click here to learn more about credit inquiries.
What Habits Are Ruining Your Credit?
Many consumers have had to deal with bad credit that required the help of credit improvement in Charlottetown, but the truth is, much of this can be avoided. There are so many habits that consumers adopt that are having a negative impact on credit scores, including the following:
Too many credit checks – If you constantly apply for new retail cards every time you see a good deal, you could be sabotaging your credit score. With every loan and credit card application comes a hard inquiry, which you already know is bad for your score.
Not using your credit card – Having a credit card and not using it can actually be a bad thing for your credit score because you’re doing nothing to actually establish and build a strong credit history.
Missing your mortgage payments – Obviously, missing debt payments is a bad thing for your credit score. That said, if your credit score is healthy before missing a payment, your lender might forgive you this one time as opposed to if you already have a history of missing payments.
Having too much debt – Having many large balances on your credit cards and only making minimum payments every month can be detrimental to your credit score.
Do you have too much credit card debt? If so, be sure to read this article.
Closing out old accounts – Even if you’ve paid off a credit card debt, that doesn’t necessarily mean you should close the account. Doing so can actually have a negative effect on your credit score because it can affect your utilization ratio. Instead, use it once in awhile just to keep it active.
Asking for credit limit increases – Every time you ask for an increase in your credit limit, your creditor will want to pull your credit report, which can put a “hard inquiry” mark on your report.
Take a look at this infographic to learn how bad credit can affect your daily life.How to Change Your Spending Habits to Improve Your Credit
If you’re seeking credit improvement in Charlottetown, there are some things you can do on your own before reaching out for help from professional services:
- Establish a realistic budget
- Increase your income
- Pay down your debt
- Pull your credit report to fix any errors
- Never miss a loan payment
Click here to learn a few more ways of improving your credit score this year.
Credit Building Products to Help Improve Your Credit
If you still need some assistance rebuilding your credit, there are some credit building products available that can help, including the following:
Secured credit cards – Since these require collateral to back them up, they’re much easier to get approved for as opposed to traditional unsecured credit cards. Using secured credit cards responsibly can help you build good credit over the long haul.
Credit Rehab Savings Program – This credit building program can help you build or improve your credit and is great for those who have had difficulty in the past with their credit or are looking to build credit from the start. You’ll make low payments on a weekly basis to your credit rehab saving program provider, which will be reported to the major credit bureaus to help your credit score grow.
Credit counselling – A professional credit counsellor can help to educate you on how to make sound financial decisions, come up with a workable budget, and establish healthy spending habits that can help improve your credit score over time.
Debt consolidation program – This type of program involves working with a credit counsellor to create a plan of action to repay your debt. Over time, debt repayment can help to increase your credit score.
Interested in applying for a debt consolidation program? If so, check this out.
Need Help With Credit Improvement In Charlottetown?
If your credit score is suffering and you need some help giving it a boost, Loans Canada can help. We offer a wide variety of financial products and services that can help you pay down debt, improve your credit, and get back on track with your finances.
