Last month, we explained that your credit rating is obtained by the evaluation of all the information held on you, on your loans, your credit limits and your credit cards. In Canada, the creditors use the terms credit or Beacon score, a number that varies from 300 to 900. Beyond 700, it generally states that the individual’s risk of default is fairly low.

A solid credit file is essential because it can translate into important savings. With a good credit history, you will be more likely to obtain higher credit limits and more advantageous interest rates.


Which factors bring down your score?

You have too many consumer credit accounts.
Too much available credit can sometimes harm your score because creditors could think that you have the possibility of spending more than what you could possibly pay back.

Your account balances are too high.
High debt levels tell possible creditors that you might spend more than you can afford.

Your report doesn’t contain enough recent information.
It is recommended to use your credit accounts regularly. Creditors need recent data to evaluate your payment history and expenditure behaviour.

You would like to improve your score?

Refund your loans and pay your invoices in entirety and in time. If you cannot afford to do so, pay at least the minimal amount that appears on your monthly statement.

Use your cards regularly but keep your balances under 35% of your available limit. For example, if your limit is 1 000 $, maintain a balance lower than 350$. If your balances are between 35 and 50 percent, you score could start dropping.

Never exceed your credit limit.

Avoid cumulating cards, including those of stores. Close certain accounts or reduce their limit. Avoid closing too many accounts however - particularly your oldest accounts - because that could also damage your score.

Check your monthly statements to make sure they are accurate.
Verify that your credit reports/ratios are exact. You should request a copy of your file from Equifax and TransUnion at least once a year.

Only apply for credit when truly needed as too many “credit checks” will lower your credit rating.
Make sure you have a credit history. Your score can be relatively low simply because you never did contract loans and never showed your capacity to refund them. You can start by using only one credit card but two major cards are recommended.

Communicate with your creditors immediately if you have problems carrying out your payments.
Read carefully your credit card statements and other financial documents. Be aware of rate or fee increases related to your card and accounts. Only do business with companies you know and trust.

Remember that small changes in the way you use and manage your credit can have a notable impact on your Beacon score!

Source Multi-Prêts