Improving your credit score can open doors to better loan terms, lower interest rates, and higher credit limits. While your credit score can drop if you miss payments or max out your credit, it can also rise quickly with the right steps. 

In this guide, we'll show you how to potentially boost your credit score quickly in a short period of time.

Let's dive into the strategies that can help you improve your financial health fast!

How Do Credit Scores Work?

Before we talk about how you can improve your credit score, let’s first talk about how credit scores work.

Credit scores are numerical ratings used by credit bureaus to assess your eligibility for loans and credit cards. Basically, it’s a number they use to sum up your financial position. 

Your credit score can go up (and down) based on certain actions or events. Credit bureaus use these events in their calculations and reveal the decrease and increase in your credit score every 30 to 90 days. 

Both Equifax and Transunion have never explicitly stated the formula they use to calculate credit scores. However, they do use data provided by FICO, which develops widely used scoring models. While we may not know the exact formulas, we have been able to determine a few key factors you can use to influence your credit scores.

5 Credit score tips to increase credit score quickly

The average credit score in Canada is 650, and 20% of Canadians have a credit score that falls below this line. But don’t worry, you can take certain actions to substantially improve your credit standing and qualify yourself for that loan you’ve always wanted.

So, with that said, here are 5 quick credit score improvement tips that may raise your credit score in a short period of time.

1. Ask for a credit report and review your report.

Get your free credit reports compiled by each of the two credit bureaus in Canada, Equifax and Transunion.

Review your credit report thoroughly to view and understand all the factors that may be affecting your credit score. If there are any errors, contact the responsible party and correct them as soon as possible.

You will also be able to see exactly which event or action is negatively affecting your credit score. Addressing those items properly would substantially increase your score.

2. Clear any past-due bills with high interest rates

If you’ve missed a payment at any time in the recent past, try to clear it as soon as possible. Missed payments can reduce your credit score by as much as 100 points. 

Clearing them immediately may allow your credit score to improve as your score is usually more dependent on recent activity than past credit issues.

Ensure you pay your debt instead of continually transferring it – According to FICO, paying down your debt is one of the most proficient ways to increase your score. 

3. Keep the balances on your credit cards low 

The available balance on your credit cards plays a significant role in determining your credit score. It's advisable to keep your credit utilization ratio—the amount of credit you're using compared to your total credit limit—below 30%, ideally aiming for 10% or lower across all your lines of credit. This helps demonstrate responsible credit management to lenders and can positively influence your credit score. Monitoring and managing your credit utilization regularly can also help you maintain a healthy credit profile.

4. Don’t close accounts that have been paid off

Always try to keep your unused credit card accounts active to show credit bureaus that you can manage your credit wisely. Maintaining old credit card accounts helps you build a long credit history, which is an important factor in your credit score. 

Closing these accounts can reduce your available credit, increasing your credit utilization ratio and potentially lowering your credit score. Keeping your old accounts open can therefore help maintain and even improve your credit score over time. You don't have to keep an unused credit card open forever, but make sure to evaluate the pros and cons carefully before making a decision.

5. Try a credit building program

Rated Canada’s #1 credit builder according to Forbes, KOHO offers a great credit building program. They have several different ways to build a credit history based on your preference, and when you make on-time repayments it will raise your credit score over time.

Benefits of improving your credit score

As mentioned before, improving your credit score can improve your financial position considerably and provide some key benefits that you can take advantage of. Let’s take a look at what some of these benefits are:

• Lower interest rates on loans: Individuals with high credit scores can secure loans on lower interest rates. This makes making monthly payments easier and saves you significant money over the course of the loan. 
• Better credit card offers: Higher credit scores make you eligible for credit card offers with better terms and higher credit limits. Plus, these new premium offers may contain better cashback rewards and travel benefits.
• Rental approvals: Landlords often look at your credit score before agreeing to rent the property to you. Higher credit scores can help you gain favor with landlords and secure rental properties more easily. 
• Lower insurance premiums: Insurance companies keep a keen eye on your credit scores. A higher credit score could help you get into their good books and get lower rates on home, auto, and other insurance premiums. 

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P.S. — Looking for a loan to consolidate your debt? The experts at Lotly are dedicated to giving homeowners like you the fairest possible loans and secured lines of credit to make the most of your financial health. Get a free consultation today!

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