Bruised Credit – 5 tips to repair your credit quickly.

Gail Moorhouse, Executive Director,

Community Futures Peterborough

 

Credit is based on trust.  Your credit score is proof you meet your commitments.   Your score is a snapshot of where your stand financially today. 

In order to change your score you need to understand how it is calculated so you will know what to work on changing first.

Payment History (35%) – you can not change your past and items on your record will remain for 6-7 years.

Amount Owed (35%) –  this is the utilization of the available credit and 20-39% is an ideal place to be.   You can change this figure one of 2 ways.  First is to pay down your balances thus lowering the amount of credit used.  Second choice would be to strategically increase the available credit.

Length of Credit (15%) – This is an average of the timeframe for all your cards, therefore never cancel your oldest card.

Types of credit used (15%) – this is the diversity of your credit mix such as mortgage, installment payments like a car loan, credit cards and revolving credit such as phone bills. 

New Credit (10%)  – applying for new credit which create a hard hit on your score.   That being said they do expect that when you need to shop for a mortgage or loan, you will probably check out multiple lenders thus the algorithum takes this into consideration.  

So 5 ways to improve your credit score

1. Make payments on time and make at least the minimum payment.

2. DO NOT close your oldest credit card. Keep it an use it once a year just to keep it active.   Pay it off immediately.

3. Be strategic about your purchases. Don’t buy a car, a house and apply for a new credit card card at the same time.   Multiple hard hits to your score can have significant impacts.

4. Over time, build your diversity of credit with different types of accounts.

5. Pay your phone bill on time.

Late payments, missed payments, debts sent to collection, bankruptcy and payments withheld for a dispute will damage your credit history, and will remain on your report for 7 years.   

Credit is based on trust.   Honour your commitments to yourself and others.

The reward will be more favourable interest rates and access to sufficient credit when required.