Step 1. Review your credit report regularly
To improve your credit score, make a habit of reviewing your credit report. You’re entitled to a free copy of it once each year — see our page on ordering your credit report.
Here’s what to look for:
- errors relating to payments, such as one you’re positive you made on time but is shown as late
- negative information that’s more than six years old (this information should not be on your credit report)
- unfamiliar accounts (this is a possible sign of identity theft)
If you spot anything on your credit report that shouldn't be there, see our guidance on fixing a mistake on your credit report.
Step 2. Pay your bills on time
Making your debt payments on time is the best thing you can do to improve your credit score.
If you tend to lose track of when your bills are coming due, look into setting up automatic payments. Many creditors offer direct withdrawal from your account as your bills become due.
Step 3. Reduce the balances on your accounts
Generally, carrying balances below 50% of your credit limit is good credit hygiene.
If your balance climbs higher than that, bring it back down below 50% as soon as you can. Below 30% is even better.
About a month after you pay down your balances (and keep them there), your credit score should increase. That’s as long as you don’t have other negatives against you, like late payments.
Step 4. Consolidate your debts
Consolidating your debts means combining them into a single loan. This is sometimes called a consolidation loan. Usually, the interest rate will be lower than the average of the interest rates on your various debts.
A consolidation loan can improve your credit score by helping you pay your bills on time.
Creditors may offer you a better interest rate on a consolidation loan if you guarantee the debt with collateral. Collateral is something you can use as security for a loan. If you fail to pay back the money you borrowed, the creditor can take the collateral instead. For example, if you put up your car as collateral for a loan, and you don’t make your payments, the creditor can “seize” (that is, take) your car.
Step 5. Seek help from a credit counsellor
What if your credit score is low because you’re consistently having trouble managing your debts — maxing out your credit limits, paying late, or missing payments altogether? A credit counselling agency may be able to help.
A credit counsellor can:
- combine all of your monthly payments into one monthly payment
- negotiate a new payment plan with a creditor
- negotiate a lower interest rate on your debt payments
Steps like these could help you pay your debts on time and shave down your account balances. Doing so will improve your credit score.
A credit counselling agency can also help teach you to:
- manage your money
- make financial decisions
- make a budget and stay within it
The Credit Counselling Society of BC is one of the non-profit organizations working in this area.