A Definite Guide to Build Up Your Credit Score: Step by Step

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We’ll be talking about the different aspects that you can do to build up your credit score. There’s a lot that goes into a credit score. Today we’ll focus on the main ones that you can do right away.

First Steps into improving your credit score.

Whether you are a buying your dream car or taking the once-in-a-life time trip across the world, but you are one step short in fulfilling your dreams because of a poor credit score. It happens to everyone, even to me. I wanted to get the latest Lexus sedan but my low credit score was not eligible for financing. With persistence, I was able to improve my score in a short period of time and able to buy the car with a reasonable car loan payment. If this is possible for me, I’m pretty it is possible for anyone. Here are the steps in improving your credit score.

1) Get a Copy of Your Credit Report

credit score newcomers

Getting your credit report is a good start in finding out the extent of your debt and determining a plan on how to improve it. Whether you are missing or late with payments, carrying a high amount of debt, or just simply not have enough enough money to pay, all of these reasons can have a negative impact on your credit score. Learn more on how to read a Credit Report.

Equifax Canada and Transunion Canada are two of the most common credit bureaus in the country. Both can provide a free report (once a year) via mail in a few weeks, or instantly online with a small fee.

A good practice to consider is to check your credit reports annually for possible errors or discrepancies, which may cause your score to go even lower. If you are overwhelmed with the numbers and terminologies in your report , you can to the Government of Canada website which explains them further.

2) Pay Your Debts

credit history new immigrant

Here is where your hands need to get dirty. Paying off debt is a painful process but necessary. Being late with your payments can have a negative impact in your credit score. If you cannot see yourself paying your debt on time, it is best to seek some help. Your creditor can negotiate a payment plan that can be suitable to your situation. If worst comes to worst and you cannot handle the payment plan, seek non-profit credit counselors than can help pay down your debt.

Setting up automatic payments is one way to prevent missed payments. Reminders can be set through online or phone. Just make sure there is enough money in your account to make payments. A potential problem can be overdrawing which may cause to issue fees when there is no money in your account. 

3) Get a Secured Credit Card Account

A Definite Guide to Build Up Your Credit Score: Step by Step 1

Getting a secured credit card is one of the best ways to improve your credit score. A secured credit card is similar to an ordinary one, except you have to provide a deposit and a monthly report to credit bureau. Just be careful with your spending; having a high balance can set alarms to the creditors. To be on the safe side, use 30% of the available credit. For instance having a $1000 available credit, you should be using $300.

4) Be Aware of Spending Habits

A Definite Guide to Build Up Your Credit Score: Step by Step 2

You are able to follow the steps as mentioned above, but what good is it if you cannot do them on a consistent basis. Being aware of spending habits give you a realistic outlook on how you spend and how you pay for them. Therefore, you can manage your credit score  efficiently.

Creating a budget is one sure way to keep track of your spending. You will have an idea what to spend and make sure all expenses are covered. Here is free budget planner through CreditCanada.com 

As you become more aware of your spending habits. You start to realize a lot of the purchases you make are not needed. Living within your means gives you a peace of mind from any financial burden and live comfortably overall. As a result, you can pay off debts and improve your credit score faster, which gives opportunities to make sensible splurges.

Check out the resources we published on Building Credit:

Having a bad credit score is something that no one should experience. It makes it hard for someone to make any advancement in life such as buying a house, purchasing a car, or applying for a student loan. This guide is a simple yet difficult process to do. With enough patient, persistence, and discipline, anyone can be one step closer to their financial freedom.

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