Has a fancy car caught your eye? Or perhaps you dream about buying your first home?
Well, before you can think seriously about those big life purchases, there’s one crucial thing you’ll need to do first: get your credit score into great shape.
The average Canadian has over $20,000 in personal debt, and it’s rising. As inflation spikes and interest rates go up, building your credit score could help save you valuable dollars by giving you access to cheaper lending rates.
Read on for our top tips for building credit and improving your financial circumstances.
Monitor Your Score
You can’t build your credit score unless you know your baseline.
So first things first: you’ll need to get access to your current credit score. That’s pretty straightforward. Sign up for one of Canadian’s two credit agencies, Equifax and TransUnion.
When you’ve done that, you should add a small task in your diary each month to review that score. That’ll give you something to monitor. Following the rest of the tips in this article, you should see a gradual improvement month-on-month.
Checking your credit score each month is also helpful for another reason – it’ll help you spot any red flags that could severely damage your credit rating.
Even the most organized person occasionally forgets to open a credit card bill. Spotting the problem means you can resolve it quickly before it does any more damage.
Check for Errors
Sometimes, your credit report will contain errors, and those issues could damage your credit rating.
So when you first get your report, check it for accuracy. You want to ensure all your debt balances are correct and all your addresses are listed correctly.
Most importantly, check to see if your financial status is linked to anyone else. That is normal for married couples, but you don’t want your financial records linked to an ex-partner or a housemate.
If you spot errors, get in touch with the credit agency to explain the situation and ask them to remove the false data. You might need to show proof, such as evidence of an address or a letter confirming you’ve paid a debt.
Don’t Rush It
If your score looks a little low, you might feel a sense of panic and want to build credit fast. But relax! Slow and steady wins the race; the right way to build a better score is to take your time.
Lenders want to see consistent efforts from you with your money management. So don’t scramble around applying to every credit card you spot on a comparison site in the hope you’ll get approved.
That is a no-no for managing your credit score, as multiple applications in a short space of time can raise flags with lenders.
It’s more important to take stock of where you are and find one route to a better score.
At KingCash, you have the advantage of a loan that doesn’t require a credit check, so it’s an excellent way to build your credit in the slow-and-steady way lenders prefer.
Get a Mobile Phone Contract
It might sound surprising, but getting a mobile phone can be one of the best ways to build your credit score. It means you can commit to paying each month and prove your reliability.
And you get something out of it too. Monthly contracts offer fantastic top-of-the-range phones and healthy allowances for all that data browsing!
Plus, many people find it helps to manage their finances when a regular expense comes out of their bank account each month instead of one unexpected (and hefty) bill.
Pay Off Your Monthly Credit Card Balance
Here are two scenarios:
Person A has a credit card that is nearly maxed out, and they pay the minimum amounts each month.
Person B has a small balance on their credit card, but they pay it in full every month.
You don’t have to be a world-class financial expert to determine which person will have a better credit score!
Person B consistently shows better financial management. And because they are paying off their credit card in full, they aren’t incurring expensive credit card fees month after month. It keeps their debt costs low.
Avoid using your credit card for everyday spending like groceries. Those bills can quickly add up.
Use it for a one-off luxury purchase like a deposit for a vacation or a new gadget you’ve found online, but be strict on your monthly spending limits.
Understand Credit Utilization
Suppose you have $10,000 on multiple credit cards and a balance of around $5,000. In that case, you have a credit utilization of 50%. Not many people think about this percentage, but it’s a figure you should start tracking.
It’s one of the things that will either help build your credit or damage it. Aim to keep credit utilization below 30%. When you’re getting to 80% or 90%, lenders start to look at you in a different light.
They’ll wonder if you can afford your repayments with that much debt, and your credit score will start to drop.
So keep monthly tabs on that credit utilization. If it’s creeping up, start overpaying your most expensive credit card as much as possible.
Share Your Current Account with Credit Agencies
Here’s one of the lesser-known credit-building tips. Did you know that you can securely link your current bank account with your preferred credit agency to share information on your payments?
While your immediate reaction might be to hide financial information from credit agencies, the opposite is true!
Sharing your current account, where most of your financial transactions happen, will help showcase your excellent money management skills.
You can demonstrate timely payments on TV subscriptions or utility bills and show more money coming in (from a salary) than you are spending each month. So if you are great at budgeting, share it with those who control your score!
Start Building Credit Early
It’s never too early (or late) to work on building credit to improve your personal finance. A good credit score will help you access the best mortgages and the cheapest loans.
One of the most straightforward ways to improve your financial history right now is to apply for one of our short-term cash loans.
Our cash loans don’t require a credit check, so they are easy and accessible for anyone who wants to improve their finances. Start our simple application process right now by clicking here.
