1. Pay off any outstanding collections. These are debts that haven’t been paid that were sent to a third-party collection agency for them to collect payment on behalf of the creditor. Many companies (not just credit companies) will send overdue debts to a collection agency, including ministry of justice (traffic tickets), dental offices, cell phone companies, and more. Paying off your collections will drastically increase your credit score in a few short months.
  2. Make all payments on time. Repayment history accounts for 35% of a person’s credit score. Late payments reduce credit scores and shows potential lenders that you may be an admin nightmare. Nobody wants to chase someone down for money, including them! Potential lenders want to see a person is responsible and makes timely payments each month.
  3. Keep Balances under 60% of your LIMIT. If you are going to carry a balance on a line of credit or credit card, try to keep your balance under 60% of the limit. For example, if you have a line of credit with a limit of $10,000, try to keep the balance under $6,000. This shows you are not as dependent on your credit and allows for interest to be charged without going over the limit. If you are at or near the limit of your credit, sometimes the interest charged is enough to put your OVER the limit, which can bring your score down very quickly.
  4. Don’t close credit accounts. If you have unused credit accounts that have been open for a few years, don’t be so quick to close them! They count as part of your credit score and future lenders look for long standing credit. To keep the credit report active, use the credit (even if very minimally) on an ongoing basis and make the payment as soon as you receive the statement. This will keep it from falling off your credit bureau because of being inactive, and shows responsible borrowing – helping to keep your credit score high. As a whole, your borrowing power is increased by keeping the account open, and you appear more responsible by not having balances on all the credit you have. If willpower is a problem, keep the account open, and shred the card for now!
  5. Keep Credit Inquiries to a minimum. Car shopping is the biggest inquiry-happy business out there. If you give your driver’s licence to take that shiny new car for a test drive, they are likely running your credit behind the scenes without your knowledge to see if you even qualify to buy that car. If multiple inquiries show on your credit bureau in a short period of time it can reduce your credit score and signals financial difficulty to any potential lender. The more credit you are applying for, the harder it will be to keep up with your new payments.