Every time you use credit, the lender assigns you a rating. This dimension consists of a number and a letter.
For credit the number varies from 1 to 9. A rating of “1” means that you make your repayments within 30 days of the due date. On the other hand, a rating of “9” means that you are no longer paying your debts, that you have submitted a consumer proposal or that you have declared bankruptcy.
The “I” refers to installment loans (for example, car loans);
The “O” refers to any type of open credit (for example, a line of credit or a student loan);
The “R” refers to revolving credit (e.g. credit card).
How is this score calculated
Calculated over the last six years, its true formula has never been revealed but we know the distribution of the financial information that is taken into account to calculate it:
35% – your payment history
30% – The amounts due
15% – the length of your credit history
10% – new credits
10% – the types of credits you have contracted
How to improve my credit score
Once you have done this calculation, you will get a rating from 300 to 900. Above 760, your credit score is considered excellent and it will be very easy for you to get credit, mortgages and loans for loans. Between 700 and 759, your score is very good and between 651 and 759 it is correct but the loan will cost you more. Below 650, your credit is considered bad and it will be very difficult for you to get credit after your bank. For the check my credit score this is a very important matter.
There are, however, a variety of techniques to apply to keep your score highest or improve it quickly.
Pay your bills on time
It may sound silly to say, but simply paying off your balance before the deadline can have an almost instantaneous impact on your credit score. If you pay online, do not hesitate to send your transfer three business days before the deadline so that your bank has enough time to process your payment.
Do not wait
The credit bureaus take into account the deadline for payment but also the date on which you received your invoice. The closer to this date you pay, the better your score will be. If you have the money, do not wait 21 days to pay your debt.
Do not exceed your credit limit
If your bank has granted you $ 2,000 credit limit then stick to it. Exceeding even $ 5 can have an impact on your score and can cost you a lot.
Avoid store credit cards
Several brands offer credit cards to their names however their interest rate is often much higher than that offered by banks (29% against 19% on average). In addition, they are often poorly viewed by credit bureaus.
Do not use all your credit
A good way to quickly increase your credit score is to not use your entire credit pool. If you can try not to exceed 50% of the amount allocated to you. The ideal is to use only 30% or even 10% if you want to achieve an excellent credit score.
Diversify your credit
In addition to the credit granted with a card, do not hesitate to take a personal loan, a mortgage or a loan for the car. Your ability to repay several different types of credits is taken into consideration when calculating your score
Check the errors
21% of Canadians have errors in their credit report. If you see one (late payments that were not your fault, an incorrect credit limit, accounts that are still marked as unpaid), call your credit bureau to correct them. These kinds of mistakes can penalize you.
Do not close old accounts
15% of your credit score is calculated taking into account the duration of your credit. This means that having a credit history for several years has an impact on your rating. If you have an old credit card, keep it. It will not cost you more and it will have a positive impact on your score.
Do not delay to find your next credit
Ideally, do not take more than 14 days when shopping for your next credit. The credit bureau will analyze the access to your credit history by the different creditors as one and the same request instead of several.
After reading these tips, you should know how to check your credit rating, order your credit report and improve your credit rating. That may not mean much to you, but your financial situation will be better.
Conclusion: what does my credit file contain
The slightest mistake in your file could taint your financial profile and have major consequences on your ability to borrow. Thus it is recommended reviewing your credit report each year for three reasons:
• To ensure that personal information has been updated.
• To verify the accuracy of the information indicated therein.
• To be certain that you have not been a victim of identity fraud.
Your credit report is neither more nor less your financial footprint. Your payment history, bank account history, and credit file inquiries are recorded. It is in your interest to know what is in it and to make sure that it remains accurate. What’s more, you can access it for free.