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Some Hints on Rebuilding Your Credit Score

To kick off I would say that there is no quick or magic way to improve your credit score. You just need to follow some basic guidelines consistently and avoid certain habits.

What is a Credit Score and How is it Generated?

Creditors report information on their clients payment history, available credit, type of credit, payment defaults etc. to credit bureaus such as Equifax and Transunion . These credit bureaus hold this information on your credit report and analyse it using mathematical formulae and algorithms created by a company called FICO (Fair Isaac Corporation) to produce a credit score. This often referred to as a FICO or Beacon score.

Here are the steps you should take to improve your credit score:

Get Your Present Score

Find out what your score is now and then see how much it improves over a period of say 6 months. Log on to www.equifax.ca and request your Beacon (or FICO) score. The lower the number the poorer your score. You want to aim to be over 700.

Review Credit Report

Your FICO (or Beacon ) score is calculated from information on your credit report held by Equifax and Transunion credit bureaus. Errors are made by creditors (quite frequently) when reporting to credit bureaus and it is up to you to check that the information held against you is correct. Request a report from Equifax and Transunion and check all the information is correct. Incorrect information can severely impact your credit score. Use the corrections form to report any errors.

Keep up a Healthy Payment History (this accounts for 35% of your credit score)

Make sure you pay all your bills on time. There is a 60 to 100 point penalty for late payments so open up these credit card bills and pay them straight away. Pay off any old unpaid debts recorded in your credit report as these will lower your score significantly.

Keep Low Balances on Credit Cards (this accounts for 30% of your credit score)

Generally speaking the more available credit you have the higher your score, so keep these credit card balances to a minimum and try and pay off the full balance at the end of each month.

Do not Close Old Credit Card Accounts

This will likely reduce your score as you are reducing the amount of available credit you have. Also the longer you have held credit the higher your score. Closing accounts reduces the average age of your credit facilities.

Monitor Results

Check your FICO (Beacon) score every 6 months to see how you are progressing. If your credit score is low to start with then you should see rapid improvement but if your score is high already then it gets tougher to make further improvements.

Remeber there is no quick fix and do not try and beat the system as it will beat you for trying to do so and your score may drop!

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