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How To Get Along With Your Credit Score (& Avoid Collection Calls!)

It’s rarely taught in school, everyone knows it exists, not many people know what actions affect it and it is really important when it comes to getting credit from the bank. What is it?

It’s your credit score.

It shouldn’t be a riddle, but unfortunately many still don’t know what makes up a credit score and what actions can affect it. 

Most people only learn about the credit score and its effects once they are in need of borrowing money from the bank. Many people are not educated enough about the credit score before applying for credit products such as a credit card, mortgage, car loan etc. In particular, this especially happens to new immigrants and young people ages 18-25.

It is important to know what purpose the credit score serves and how to handle your credit products with care. 

A credit score is your “grade” for using credit. Just like in school, the teacher marked you for your reading, math and other subjects, the credit bureau gives you a mark, ranging from 0-900 for using borrowed funds.

Below are the components of your so called credit “mark”:

What Positively or Negatively Affects the Credit Score?

1. Timely payments – If your payments are on time your score will increase, but if they are late by more than 30 days your score will definitely decrease. The late payments will stay on record.

2. How much is spent–  For example If your credit card is always “maxed out” and only minimum payments are made this can decrease your score. The reason is, to the credit bureau, it looks like you are dependent on borrowed funds for a living. Try making more than minimum payments, or use less than 75% of the credit limit. For example, if our credit card’s limit is $1000, try keeping the balance below $750. If the maximum is reached, try paying it off within a month. Paying off the entire balance on a regular basis or making payments of more than the minimum amount will increase your score.

3. Credit History Length – The length of your credit history speaks to your experience.  It is recommended to have at least 2 years of good credit history before applying for any credit product. Would you lend to someone who has minimum credit history vs. someone who has 5 years of great experience? 

4. Types of credit products – Having different types of credit products can also improve your credit score. This shows you can handle different types of payments and products. For example, a mortgage is very different from a credit card or a loan. If you have all three and the payment history is good then this can improve your score.

5. Recent applications for credit – It is not recommended to apply for credit products more than 2 times in six months. If you apply many times within 6 months this can decrease your score. Every time a full credit application is submitted, your credit score is checked. Requesting a credit check for rental or personal use does not count.

Following the above guidelines will help tame your credit score and be approved for  important credit applications. Taking your credit score seriously will lead you to a successful path in personal wealth.

Category: Back To Basics - FAQsDay to Day BankingTips and Advice

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Article by: Anna Suzdenkova

Employed in the financial sector for over 7 years. Held various roles including financial advisor, auto claims adjuster and manager of customer service. Attained an accounting degree with Honours. Mutual fund licensed. Passionate about helping people. Forever an optimist, positivity is the key to a happy life. Enjoys helping people decipher the banking world and use it to their advantage!