EXPERT GUEST. In Canada, the credit file is administered by two companies: Equifax and TransUnion. This record reflects your payment history, your borrowing capacity, and your ability to properly pay the various loans.
It’s a bit like a resume that you present to a lender when you apply for new credit.
If you find yourself with a poor credit history, whether because of a consumer proposal or bankruptcy or simply as a result of financial difficulties, it could prevent you from borrowing again.
Here are five ways to improve your credit report:
Check what needs improvement
The first step is to get your credit report from Equifax and TransUnion. You can apply online; this will allow you to know your credit score (or rating), on which the financial institutions base themselves to grant or not a loan, and, if necessary, to determine the conditions.
It is not common for errors to creep into a person’s credit report. It is therefore advisable to check it regularly.
Obtaining a credit report from these two institutions is free. Services to be paid for are folder monitoring or alert programs.
Even if all elements of the credit report are accurate, it is still possible that the credit score is bad. Here are the main credit scoring factors and their impact on the credit score (or score):
• Payment history: A history of overdue payments presents a greater risk to creditors. Thus, this factor has the greatest negative impact on credit score. This represents approximately 35% of the credit score.
• Debt Amount: Debt contributes 30% to score calculation. The closer you get to the authorized credit limit, the more the credit score is affected.
• Age of accounts: Creditors like to see a history of credit usage and repayment. For someone applying for credit for the first time, for example, there is not a lot of data to rely on. This factor accounts for 15% of the score.
• Combination of accounts: this counts for 10% of the score; lenders want to ensure that the borrower can manage both revolving credit and installment credit.
• History of credit applications: many credit applications can give the impression that the individual is desperate. This will lower the score. Credit inquiries represent 10% of the score.
Agree with all creditors with whom payments are late
Often, creditors will remove the negative mark from the report if the payments are regularized; it may be necessary to make several timely payments before the note is removed. Once this is done, it takes several months for the rating to rise significantly.
Avoid making several credit applications in a short period
Although it is normal and expected to request credit from time to time, when lenders request the credit file, it is noted as an application, even if the loan is not granted or accepted by the consumer.
If there are too many applications on your credit report, lenders may believe that you are living beyond your means.
Avoid making only the minimum payment and approaching the credit limit
Making only the minimum payment may be construed as an inability to meet one’s obligations.
When the credit utilization rate approaches the limit, the credit rating may suffer. So if the total available credit on a charge card is $10,000 and you’re currently using $8,000 of it, paying off that balance could increase your score.
It is recommended to keep the credit utilization rate at around 30%. This represents a debt of $3,000 on an available limit of $10,000, for example.
Open a secured credit account
Obtaining a credit card secured by a deposit can help boost your credit score. This type of card involves depositing money into an account to secure the loan. This allows the creditor to have the guarantee that the balance will be paid and, at the same time, this allows the consumer to re-create a good credit history and thus increase his score.
Like the CV, the credit report can be improved by adding new experiences, being diligent in payments, and meeting deadlines.