Tips To Improve Your Credit Score And Financial Know How

Well hi there! I’m Shannon Lee Simmons, financial planner and all around money geek. I’m super stoked to be a regular contributor to LowestRates.ca! Today, I’m going to drop some awesome tips on how to improve your credit score and improve financial awesomeness.

November is Financial Literacy Month, a month long campaign designed to teach Canadians how to maintain an affordable living, provide for their loved ones, invest in the future, and when possible, contribute to their communities. It’s an important time of year that reminds all of us to manage money appropriately.

Here are a few ideas to help you improve your own financial literacy, which should encourage you to make responsible decisions with your money.

1.  Check Your Credit Score

There are two national credit bureaus in Canada – Equifax Canada and TransUnion Canada. These bureaus have your credit report on file, containing your personal financial data within a six year window.

The bureaus crunch your data through a mathematical calculation to calculate your credit score. This is a three digit number ranging between 300 and 900. You can acquire your credit score as by contacting the bureaus, and ask to be mailed a copy of your credit report.

Some of the factors that will affect your credit score are:

• Payment History: describes whether your payments are made on time each month
• Outstanding Debt: the amount of debt you carry over month to month – aim for less than 30 percent of your credit limit when possible
• Credit Account History: the amount of your active accounts that build your credit history
• Recent Inquiries: the number of institutions that freshly checked your credit score

2.  Pay Down Your Debts

One of the most important financial promises you can make is to pay down your debts every month. Remember that the amount of credit you use compared to the amount of credit that you have available affects your credit score. If you continue to spend without paying down your balance, your credit score will definitely take a beating.

You can establish a budget to ensure you make the appropriate payments, and also keep yourself from overspending on your credit card. Keep a close eye on the amount of new charges you make each month, and always commit to making the same sized payment every month.

Paying down your debts helps improve your credit score, but it also means you avoid paying unnecessary interest penalties. The amount you spend and your pattern at paying off the balance affects the amount of interest you owe over the lifetime of the loan. If you pay down the debts sooner, you pay less interest.

3.  Don’t Rush To Close An Old Account

Remember the credit account history point on your credit score? This is a detailed summary of the credit accounts attached to your name, and how successful you were at paying off the balances on those accounts.

When you get one of your accounts down to 0, such as an old credit card, you may rush to cancel that account, feeling there is little need for the card anymore. But that account is part of your credit account history, and proof that you paid the balance down to 0 helps your credit score.

However, if you close or cancel that account, you no longer have that history on your credit file. Remember to keep your all your accounts open, even if you have little need for the account going forward. Lenders reward fiscally responsible people with higher credit scores, which will make it easier to acquire larger loans in the future.

4.  Stick To A Plan

Creditors are always looking for reasons not to increase your credit. If your credit report shows unexpected lavish spending or a sudden decline in your monthly payments, creditors are more likely to decline your request for more credit.

Try to set limits on the amount you spend each month. If you do make an expensive purchase, pay it off at the end of the month. This way you show creditors that if you do need to spend money, you are more than capable of paying off the debt without accumulating interest.

And remember an old saying that “the best laid plans of mice and men often go awry.” Take those words to heart by leaving yourself a little extra money on reserve should the unexpected occur – such as a financial penalty or the unexpected loss of your job. It’s always better to have something set aside for a rainy day than to struggle and scramble to make ends meet.