It seems all too often that people are telling me about their credit score, and from what I’ve heard, one will either brag about how incredibleit is, or how horrible it is. For the people with great credit scores, congratulations, and keep it up, but unfortunately this article is not for you. This article is for people for whatever reason have “bruised” their credit, and are looking for ways to improve it. The best way to prepare yourself for the year or two ahead of you while you diligently work hard to improve your credit is to know what to avoid, and the myths people may tell you about how to improve your credit. You wouldn’t take advice from a Mechanic if you just broke your foot would you? No way Jose! Educate yourself.
- Too many credit cards will hurt my credit score
Nope. Cancelling active credit cards, or accounts will bruise your credit because all of your payment history will be lost along with the type of credit granted. Did you know that the average Canadian has ten credit sources! How many do you have? Just make sure to pay all sources off on time. Maintain a balance of no more than 50% of the limit, and increase the limit if you find yourself going above 50%. Therefore, the more credit you have, the more opportunity you have to prove that you can manage and handle debt.
- Use your credit to build up your credit score
Keep your balances low, and manageable. Making your payments on-time will build your credit history strength and score.
- “But I always pay my Internet and Utilities on time”
Who cares. These services don’t report your payment history to the bureau. But note, they do report when you DON’T pay. Other organizations that only report upon default are municipalities, and ICBC. Remember to pay your traffic tickets, and bylaw infractions. Most times I find unpaid parking tickets are the reason for poor credit.
- Checking my Credit Score will decrease it.
Did you know that there are two types of inquiries? Soft, and hard. A soft inquiry is when you pull your own credit report from an online sites like Equifax. Credit card companies also pull soft inquiries when marketing pre-approval offers. Soft inquires do not affect the credit score, and a consumer can pull their own credit score as many times as they wish without repercussions. A hard inquiry is when someone is submitting an application for a loan, or credit card. It’s triggered by the applicant, and affects your score slightly.
Don’t go overboard. Recording the number of inquires a consumer has on the credit report allows potential lenders to see how often a consumer has applied for new credit. This may trigger the lender to believe someone may be facing credit difficulty. Too many inquiries could mean that a consumer is deeply in debt, and looking for loans or new credit cards to bail themselves out.
That being said, it’s actually in your best interest to check your credit from time to time to make sure theirs nothing wrong or incorrect. Identity theft happens, and I’m sure you’d like to know if theirs someone other than you opening accounts in your name. All inquires are required to stay on your credit report for at least a year, and hard inquires remain on the report for two years and appear on all credit reports. All inquires disappear from the report after two years. Soft inquires appear on the report that you request from the credit bureaus, and are not visible to potential creditors.
Only individuals with a specific business purpose can check your score. Creditors, lenders, employers and landlords are some examples of approved business people. Their inquiries only appear on the credit report that’s checked.
- I’m screwed if my payment is late.
Nope. Creditors are willing to work it out with you if there’s a late payment. If they’re notified in a timely manner, a late payment can be easily removed. Just don’t make a habit of it ok.
All the best, and let me know if you have any further questions, or would like my help to improve your credit.
-D