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A Guide to Boosting Your Credit Score: Understanding and Improving Your Financial Standing

Paula Tysoski
Saturday, May 18, 2024
A Guide to Boosting Your Credit Score: Understanding and Improving Your Financial Standing


Your credit score plays a crucial role in your financial journey, especially when it comes to securing financing for significant life milestones, such as buying a home. Understanding how credit scores are calculated and taking steps to improve them can have a lasting positive impact on your financial well-being. In this blog, we'll break down the key factors that influence your credit score and provide practical tips on how to improve it over time.

Decoding the Credit Score Formula

Credit scores are complex calculations that reflect your creditworthiness, helping lenders assess the risk of extending credit to you. While various credit reporting agencies use slightly different methods, the following factors are generally considered in order of importance:

Payment History

Your payment history is a critical factor that shows your ability to manage credit responsibly. Paying bills on time, including credit card payments, loans, and utility bills, demonstrates reliability and trustworthiness to lenders.

Used vs. Available Credit

Your credit utilization ratio compares the amount of credit you're using to the total credit available to you. Keeping this ratio low, ideally below 30%, shows lenders that you're not overly reliant on credit.

Length of Credit History

The longer you've had credit accounts, the better. Lenders want to see a track record of responsible credit management over time.

Public Records

Negative events like bankruptcies, tax liens, and court judgments can significantly impact your credit score. These records indicate financial struggles and may lead lenders to view you as a higher risk.

Number of Inquiries

Each time you apply for new credit, a hard inquiry is recorded on your credit report. Multiple inquiries within a short period can indicate increased credit-seeking behavior and potentially lower your score.

Tips to Elevate Your Credit Score

Improving your credit score is a gradual process that requires patience and commitment. Here are some practical steps you can take:

Be Selective with Credit Applications

Each time you apply for credit, it triggers a hard inquiry. Minimize these inquiries by only applying for credit when necessary and being cautious about opening new accounts.

Maintain Existing Credit Accounts

Keeping unused credit cards open can contribute positively to your credit history and overall credit utilization ratio. Closing accounts may reduce your available credit, potentially impacting your utilization rate.

Timely Bill Payments

Consistently paying all your bills, including utility bills and credit card balances, by their due dates demonstrates financial responsibility and contributes to a positive payment history.

Monitor Your Credit Report

Regularly review your credit report for any errors or inaccuracies. If you notice discrepancies, dispute them with the credit reporting agencies to ensure your report reflects accurate information. Some online banking apps allow you to check your credit score without impacting it. BMO and RBC has CreditView by TransUnion which updates once a month and CIBC has Free Credit Score Service which updates every 3 months.

Manage Outstanding Debts

Develop a plan to gradually pay off existing debts, focusing on high-interest accounts first. Reducing your overall debt load can improve your credit utilization ratio.

Your credit score is a powerful tool that can influence your financial opportunities and decisions. Understanding the factors that contribute to your credit score and taking proactive steps to improve it can lead to better loan terms, lower interest rates, and increased financial stability. By following the guidelines outlined in this blog, you're well on your way to achieving a stronger credit profile and a more secure financial future. Remember, while it may take time, your efforts to enhance your credit score will ultimately be well worth it.


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