7 ways to improve your credit score

The single best thing you can do for your credit score is pay your bills on time. That means making at least the minimum payment by the due date every month. Payments even a day or two late can negatively affect your credit score, so consider setting up pre-authorized debits or registering for electronic alerts on your accounts to remind you when bills are due.

Even if you pay all your bills in full and on time each month, your credit score can suffer if you use too much of your available credit. This can be a red flag to creditors that you're overleveraged. Lenders prefer you borrow no more than 35% of your total credit at any given time. For example, if the limits on all your credit products total $10,000, you could borrow up to $3,500 ($10,000 x 35%). Note that you can actually improve your credit score by accepting an offer to raise your credit limit, so long as you keep your borrowing amount the same. Doing this will lower your credit usage rate.

If you've borrowed too much of your available credit, paying off some of your debt can improve your credit score. Two popular approaches to debt repayment are the avalanche and snowball methods.

With the avalanche technique, you make the minimum payments on all your debts, then put any extra money towards the debt with the highest interest rate. This will help you pay less interest overall. With the snowball method, you pay off your debts one at a time, starting with the smallest balance to build momentum. You could also look into consolidating your debts into a single loan with a lower interest rate instead of paying each debt individually.

The length of your credit history is one factor that plays into your credit score since lenders like to see a long record of responsible borrowing. So, it can help your score to keep an old credit account open and active, even if you don't need it. Keep in mind that if you transfer a balance from one account to another, that's considered new credit.

If you have a tough time getting approved for credit —perhaps you're new to Canada or had previous credit problems — a secured credit card can help you build, or re-build, a good credit history. A secured card is sort of like training wheels for your credit. It's impossible to default on your account because you must provide a security deposit in advance that can cover any missed payments. Of course, to maintain a good credit score, you want to avoid that scenario by always making your payments on time.

There are two types of credit inquiries: “soft” and “hard”. Soft checks, including requests to view your own credit report, don’t affect your credit score. Too many hard checks – such as when you apply for credit, fill out a rental application, or apply for a job – can damage your score because lenders may worry you’re trying to live beyond your means. So, be mindful of hard checks and apply for credit only when you really need it. If you’re shopping around for a mortgage or car loan, try to get all the quotes within two weeks. The inquiries will then be treated as a single hard check for the purposes of your credit score.

Negative information that hurts your credit score, such as late payments, can stay in your credit history for up to 6 years. So, it's important to review your credit report regularly to ensure it doesn't contain any errors. You can get a free copy of your report through Canada's credit bureaus, Equifax and TransUnion, or the CIBC Mobile Banking® App. If you do find any discrepancies, contact the relevant financial institution as soon as possible and ask them to correct the information.

Need additional advice?

If you're looking for some extra help, book a chat with one of our advisors. They can help you create a plan to get your credit score where you’d like it to be.