Improving your Credit & Maximizing your Borrowing, Part 3
Here are some useful information you should know about Credit Scores. I’ve listed the main areas used in calculating your credit score, top ways to improve your credit score and other tidbits you might want to be aware of.
There are 5 Main Areas used in calculating your credit score:
1. Your payment history – Have you paid your bills on time regularly
2. Amounts you owe – Do you owe a lot, are you close to your credit limits?
3. Length of your credit history – How long have you had credit?
4. Types of Credit Used – Ie. Consumer debt is not treated as well as lines of credit
5. Your New Credit – Have you recently gotten new credit?
Here are the top 5 ways you can improve your credit:
- Pay all bills on time.
- Keep revolving credit balances low.
- Limit your credit.
- Be focused when you go for credit.
- Manage your credit responsibly and regularly.
Here are some other good things to know about Credit:
- We live in a credit society, vs. the cash based society of our (grand) parents.
- Treat Credit as an asset as it can work for you producing your cash flow.
- It is hard to live in today’s world without credit. (i.e. Rentals / payments / home purchases)
- Extension of Credit is the banks most important function.
- You need to monitor your credit regularly, knowing all changes at all times.
- There are 3 Major Credit Bureaus in Canada: Equifax Canada Inc., Trans Union of Canada Inc. and Northern Credit Bureaus Inc.
- You are entitled to one free credit report per year.
- Lenders require you to have at least 4 open L.O.C.’s to show stable history.
- You should have an overdraft and never bounce any cheques or payments.