First the basics
Your credit score is a number. Most people understand that the higher the number the better your credit is—900 on the high end and 300 on the low end. Your score represents the level of risk to a lender when you want to borrow.
What actually impacts your credit score?
The two biggest impacts to a credit score are payment history and utilization. In other words, do you pay your bills on time and are you maxing out your credit? Lenders want to know about your past behaviour because that predicts your future behaviour in most cases.
What’s the best way to build or repair your credit?
It may seem like a no-brainer but paying your bills on time can have a big impact on your credit—in a positive way.
McPhail has a simple tip to help you remember to pay your bills on time.
“Set up an automatic payment, even if it’s just for the minimum amount. That way you don’t even have to think about it. You could also set a calendar reminder or alert on your phone to help you remember,” explained McPhail.
Also, paying your bills on time and in full each month is a double-whammy of positive credit goodness.
McPhail also said maxing out your credit limits will negatively affect your score.
“The sweet spot is to be at 30-35 per cent of utilization because you’re using your credit but you’re not maxing it out. Lenders usually don’t have a concern until you’re up over the 75 per cent mark so if you can stay in between and keep your usage under control then that will help boost your credit score,” said McPhail.
Talk with professionals about your credit history whenever you can
If you’re meeting with a lender, McPhail emphasizes you should take that as an opportunity to look at your credit history. Not only can you see your history and check for accuracy, but you also have the opportunity to ask questions.
“If you have the chance when you’re giving a lender authority to pull your credit report, ask them if you can look at it with them,” said McPhail. “They see credit bureaus every day. They know what’s on it and can help you understand.”