When it comes to your personal credit score, there are a variety of unknown factors that can affect your score. For example, most people don’t realize the importance and difference between two important dates while paying off their credit card debt: the due date and the statement date. The latter is the date on the credit card statement, and refers to the date your balance is reported to the credit card bureau. As a result, even if you paid your balance on time each month, it may not be reflected in your credit score.
Here are 9 more tips and tricks to protect your personal credit scores.
1. Know your score
In Canada, the credit score range is between 300 and 900—the higher your score is, the better. This number reflects a person’s credit history over the past six years. Only 5% of Canadians are known to have a score of 850 or better, so make sure that you keep up-to-date with repaying your debts from all sources, including banks, governments and credit card companies. Checking your score regularly will alert you to mistakes and credit fraud as well. To check your credit history, you can consult the major credit-reporting agencies in Canada, such as Equifax Canada or TransUnion Canada, and receive a copy of your credit file for free.
2. Pay your bills on time
Being even one day late with your payments will hurt your credit score. In order to prevent this from happening, always allow extra time for online transactions to process. For example, make your payments at least three days in advance to avoid any possible delays. Consider setting up an automatic payment each month to ensure that you never forget to pay the minimum.
3. Never exceed your credit limit
If you’re close to being maxed out, take precaution and pay more than the minimum or else the interest due could push you over the limit. Going over your limit even by as little as $5 could mean costly charges from your credit card company and will hurt your score.
4. Don’t apply for store credit cards
Many stores offer one-time discounts for signing up for their store credit cards, but don’t be tempted by the offers. Most store credit cards have interest rates as high as 29%, which are viewed in a negative light by the credit bureau and can lower your score.
5. Spread out your spending
The percentage of available credit you have is important because this will affect your score. Distribute your spending more equally so that you don’t have one charge card that’s nearly maxed out, while another card is at full capacity for spending. Spread it out so that both cards are at 50% capacity.
6. Prioritize your payments
You must decide which payments take priority and pay those first. For example, mortgage payments are important, but they are not usually shown Canadian credit reports. So instead, you should pay more attention to your credit card, loan and lease payments and make those on time.
7. Beware of closing accounts
If you’re preparing to close an account, ensure you make all your payments on time, even if you’re not completely satisfied with the lender. Missing a payment will show up on your credit report, can hurt your score, and is very difficult to fix. When closing an account, ask for written confirmation that the account was closed with a zero balance.
8. Don’t close unused credit cards
If you have low interest credit cards that you don’t use, keep them open and use them every so often. It is actually an advantage to have a zero-balance credit card, as this helps to improve a low credit score.
9. Don’t apply for too much credit at once
Be careful of taking on too much credit at once because the credit bureau views this as a sign of financial trouble. For example, don’t lease a car, sign up for a new cell phone and apply for a loan all at the same time; this will raise questions about your ability to fulfill your financial commitments. Also, beware of being preapproved by multiple lenders before you’re ready to buy. Even though you can check your own credit rating, preapprovals will affect your score negatively.
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Equifax Canada—Get a Free Credit Report