Credit scores are complicated to understand. It can be extremely complicated to understand how to improve your credit score. Here are 3 ways you can get a better credit score.
What’s a good credit score?
A credit score is a snapshot in time representing the financial status and credibility of an individual. The credit score is used by lenders to understand how responsible an individual is with their money. It’s a guiding number to help them assess if they want to give you their money to borrow.
Now the question is what is a good credit score? What credit score will get you the funds you need at a lower interest rate? Keep in mind that interest rate is the cost of borrowing money. According to TransUnion, credit scores in Canada range from 300-900 and the average is approximately 650. A credit score greater than 660 is a high credit score that is considered less risky and will result in a lower interest rate. A credit score lower than 660 could result in rejection by lenders.
Road to Better Credit Score
Remember to be patient. Similar to building a credit score, improving a credit score does take time. Continue to follow the 3 methods and continue checking in every six months to check your score.
1. Make Payments on Time
Make payments on time for all your expenses including credit card payments, student debt, phone bills, etc. Your track record to make payments on time will help you build a better credit score.
2. Keep your credit utilization ratio low
Your credit utilization ratio is the amount of credit you are using to the amount of credit available to you. For example, your credit limit is $5000, you use $1000, your credit utilization is 20%. Try to keep your utilization ratio under 30-35%. This assures lenders that you are not a risk as you are not dependent on the credit.
3. Use a Secured Credit Card
With a secured credit card, you must deposit a certain sum prior to use which will become your credit limit. These cards offer a high advantage as the issuer will report your payment history and track record to credit bureaus. This is a direct link to get a better credit score with consistent payments and spending responsibly.
Check out our blog post on How to Build A Better Credit Score And 5 Ways To Improve Your Existing Credit Score for more information. AstroWealth also has you covered with our Personal Finance Guides for resources on understanding credit and debt.
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