7 Tips to repair your credit score

Your credit score is a crucial factor when it comes to securing loans and determining the interest rates you'll pay. Maintaining a high credit rating is essential, as a single missed payment can drastically reduce your score. In this article, we'll explore effective strategies to improve your credit score, even if it has taken a hit.

Don't Panic, Take Control

While a damaged credit score may seem daunting, the good news is that it's possible to rebuild it relatively quickly. Your financial destiny is in your hands, and you can influence the factors that affect your credit rating. However, it's not a miracle; it requires effort. The timeline for improvement varies, but typically, it takes a year or more. To impress potential lenders, you need to demonstrate consistent repayment of your expenses and debts.

Know Your Current Credit Score

Before you can improve your credit score, you need to know where you stand. Obtain your credit report, which is available for free from Equifax Canada and TransUnion Canada. While it won't provide your score, it will give you insights into areas that need improvement. Royal Bank customers can access both their credit report and TransUnion Canada credit score for free through their online bank account. This service allows you to simulate different financial scenarios to see their impact on your score. For non-Royal Bank customers, there are other websites offering free credit score checks, such as Borrowell.com and Credit Karma.

Improve Your Credit Score

Now that you know your credit rating, let's focus on improving it. Most scoring models consider several factors with varying importance:

• 1. Payment History (35%)

Your track record of making timely payments on loans and credit cards significantly impacts your credit score. Make it a priority to pay bills on time to boost your score.

• 2. Credit Utilization (30%)

The amount of revolving credit you use compared to your available credit affects your score. Try to keep your credit card balances low to positively influence this factor.

• 3. Credit History (15%)

The length and diversity of your credit history play a role. Maintain older accounts and avoid opening too many new ones.

• 4. Public Records (10%)

Negative items like bankruptcies or tax liens can harm your credit. Ensure your public record is clean.

• 5. Credit Inquiries (10%)

Avoid frequent credit inquiries, as they can lower your score. Only apply for credit when necessary.

Correct Errors in Your Credit Report

Periodically review your credit reports from Equifax and TransUnion to ensure accuracy. Incorrect information can negatively impact your score. If you spot any errors, dispute them promptly to have them corrected.

In conclusion, improving your credit score is a strategic process. By focusing on key factors and ensuring the accuracy of your credit report, you can steadily raise your score. Remember that patience is crucial, as it takes time for these changes to reflect in your credit rating.

Frequently Asked Questions:

How often should I check my credit score?

It's a good practice to check your credit score annually. However, it's especially important to review it before major financial decisions, such as applying for a loan.

Can I improve my credit score if I have a history of missed payments?

Yes, you can. Consistently making on-time payments moving forward will gradually offset the impact of past missed payments.

How long do negative items like bankruptcies stay on your credit report?

Bankruptcies can remain on your credit report for seven to ten years, depending on the type of bankruptcy.

Are all credit scores calculated the same way?

No, there are various scoring models, but FICO scores and VantageScores are the most widely used in the U.S. Each model has its unique calculation method.

Is there a quick fix to improve my credit score overnight?

No, there are no overnight fixes for your credit score. Consistent, responsible financial behavior is the key to long-term improvement.