As a banker, I often hear remarks about ones Beacon Score being low because of poor credit management. The Beacon Score (also called Fico Score) is one of the major factor in a credit analysis. Whenever you apply for a credit card, a mortgage, a personal loan or a line of credit, the financial institution will pull out a credit report and look at your score. If it’s not high enough, you could be declined base solely on this information.
|Your Credit Score is not only about paying your bills on time. As there are several factors that influence your Fico Score, I am presenting for easy ways to increase this magic number.
#1 Verify what lies in your credit bureau
This may seem stupid at first as what is supposed to be in your credit bureau should be your own debts and nothing else. However, this is not the case for many individuals. The first reasons would be because people think that when they stop using a credit cards or cut them and thrown them in the garbage, the account is closed. Well it’s not until you take the time to call the financial institution and request the account to be closed. The second reasons would be related to the fact that people tend to forget small bills and they could completely ignore a $25 balance on their latest furniture financing bill. The third reasons would be caused by fraud attempts under your name. This can damage your credit score for a long period of time if you do not catch it in a short period of time. For these three reasons, I strongly recommend that you order your credit bureau from Equifax (equifax.ca or equifax.com) once a year.
#2 Apply for a credit card now
As I previously mentioned on this blog, it would not be a bad idea to have three to five credit cards. Credit cards are the easiest way to build a strong credit history. All cards are reported on a monthly basis to the reporting agencies which is not the case for other loans held at the bank. While you benefit from a periodic reporting, you can show financial institutions that you are able to manage revolving credit. The best things to do with credit cards is to use them so their owing balance fluctuates over time.
#3 Use it on a daily basis
Yep, you just read “use your credit cards on a daily basis” on a personal finance blog. Put as much as possible of your recurring expenses on your credit cards. I am talking about groceries, restaurant, transport, utility bills, clothes… basically everything that is already on your monthly budget. It is important to not look at credit cards as a gift from God (it’s not!) but really a tool to build a stronger Beacon Score and get rewards from your regular expenses. At the end of the day, you have to pay for these expenses, why not using them to get something out of it?
#4 Pay your bills in full and on time
While I am telling you to use your credit cards on a daily basis, you must keep in mind that you will have to pay the full balance when your bill will come at the end of the month. This is the perfect trick to improve your Fico Score; use your credit as often as you can while paying the entire balance at the end of the month. If you can not make the full payment, make sure that the one you make is one time. A late payment on a $10 bill has the same impact on your credit bureau than not making a $1000 payment. Credit is based on trust, no matter what is the amount.
If you want to know more about how to improve your credit score, please check-out my archive under the credit score category. I am trying to include as much as revelant stuff there.
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