It usually pays to have a high credit score, and improving your credit rating can be a slow process. But there are in fact a few under the radar or sneaky ways that you can go about improving your credit score. Some you might not even know about.
Using the following methods, you could see your credit rating and score improve faster than you might normally expect. It won’t be instant, but these tips can speed up the process where Canadians can benefit.
Credit Ratio Hack
The amount of credit available to you compared to the amount you have used is what is known as your credit utilization ratio. There is a ration for your overall credit card use, along with for each credit card you have.
While it’s advised to keep this ratio under 30%, you can boost your credit score by keeping your credit utilization ratio under 10%.
If you speak to your credit card issuer and ask when your balance would be reported to Canadian credit bureaus, you can stay a step ahead. Note that this is usually the last day of the billing cycle for your account and different than what your billing statement might say for the due date.
Should your payment be received after the reporting date, then your overall reported balance could be high, which can negatively impact your credit score, because your ratio appears inflated. If you make sure to pay your bills by the closing date rather than the due date, your balance is more likely to be low (or even zero) and this can lower your utilization ratio. Which in turn can help to boost your credit score.
Strategic Debt Payments
To take what you may have just learned regarding utilization ratios from above, this is another hack that’s easy to do, once you’re aware of it. As mentioned, your utilization for credit cards is based on overall, and each card you have. Let’s suppose that you have 2 credit cards, with Card A carrying a 40% credit utilization ratio, while Card B has a 10% ratio. If you were to focus on paying down the 1st card (A) you have, it’s going to have a positive effect.
The way to determine your credit utilization ratio is by dividing the amount you have used in credit by the total amount credit available. For this example, that would mean you have used $2,400 in credit on Card A, or 40%. For that card to be at 30%, you need to pay off $600 in credit card debt.
But not so fast, your credit utilization ratio measures your overall credit used per card, and for all cards you may have. So in this case, Card B has a 10% credit utilization ratio used, and when you combine that with Card A’s new credit utilization ratio of 30%, you’re at 40% overall. So to achieve the recommended minimum and have a decent credit utilization ratio, what you really want to do is get the ratio of Card A down to 20%. That means you need to pay off $1,200 and get your debt down to $1,200 to have an overall credit utilization ratio of 30%.
But let’s not forget the tip about keeping your credit utilization ratio under 10%. It’s definitely something to strive for and you’ll see how it positively impacts your credit score if you’re able to reach and maintain that lower ratio.
If you ask for an increase in your credit limit on one or more of your credit cards, but manage to not use your newly available credit, you may have made your credit ratio go down with a phone call.
Not advised for those that overspend on credit cards, this simple money hack can work in your favour if you don’t use the cards more and increase your credit utilization ratio.
But if you have recently missed any payments with your credit card balance or your credit score has what might appear to be a downwards trend, you might not want to try this one.
Get Your Mix On
While your Credit Mix might only account for 10% of your overall score, it can be an easy way to boost things too. It might even be what you need to put you over towards qualifying for better rates for when you want a personal loan.
When you take a personal loan, your credit score might decline a bit at first, but after several months of on time payments for your loan, you should see your score start to increase. It’s the combined efforts of things like this that can help to really boost things overall.
If you’re interested in a loan but have bad credit the above advice can help Canadians qualifying for better rates in future.