A low credit score can stand in the way of your hopes and dreams, like buying a house or a new car.
But there are simple things you can do to repair your credit score if it’s down in the dumps.
“Depending on the reasons for a low credit score, it can take months or even years to raise a low score to a good score, say 700. It also takes discipline,” said Tobie Stanger, Consumer Reports money editor.
One of the most important things to do is to pay all your bills on time. That can account for about 35 per cent of your score.
A good way to achieve that? Set up pre-authorized payments.
“Everybody's had that experience where you went on vacation and you missed that payment date. Set up a pre-authorized payment where at least it's the minimum payment and then you'll never be deliquent on that card,” suggested Scott Evans, a financial advisor at Blueshore Financial.
Try to keep your balances to no more than 10 per cent of your available credit. Anything more could show elevated credit risk.
Another tip is to think about diversification. Having a greater variety of credit types might help your credit score.
“Someone who has five credit cards is not going to be looked at as favourably as someone who has two credit cards, a student line of credit and a car loan,” said Evans.
If you can’t get a traditional credit card because of your credit history, go for a secured credit card. That type requires a deposit to protect the issuer. Make timely payments and your credit score could improve.
And finally, request a free credit report once a year from each of the reporting agencies TransUnion and Equifax to monitor your progress and spot any errors.
“Don't be scared of credit. Used properly, credit and debt is something you can use to your advantage,” Evans said.
