Building a good credit score might seem complicated, but it’s actually pretty straightforward once you know the basics. Your credit score is like a report card for how well you handle money and it affects everything from getting approved for loans to renting an apartment. Here are five proven strategies to boost your score and set yourself up for financial success.
1. Always Pay Your Bills on Time
This is the most important rule for building credit. Your payment history makes up the biggest chunk of your credit score, so consistency is key.
What to do:
- Set up automatic payments for at least the minimum amount
- Use calendar reminders or banking apps to track due dates
- If you’re struggling to pay, contact your lender immediately as they may offer payment options
Even if you’re disputing a charge, don’t skip the payment. You can sort out disputes later, but missed payments hurt your score right away.
2. Keep Your Credit Usage Low
Think of this as the “30% rule.” Try to use less than 30% of your available credit limit each month. So if you have a $1,000 credit limit, keep your balance under $300.
Why this matters: Lenders see high credit usage as risky, even if you pay everything off each month. Lower usage shows you’re not desperate for credit and can manage money responsibly.
3. Keep Old Accounts Open
The longer you’ve had credit accounts, the better it looks on your credit report. This shows lenders you have experience managing credit over time.
Pro tip: If you have an old credit card you don’t use much, don’t close it. Instead, use it for small purchases occasionally (like a monthly subscription) and pay it off right away. Just make sure there’s no annual fee.
4. Be Smart About Credit Applications
Every time you apply for credit, it creates a “hard inquiry” on your report. Too many applications in a short time can hurt your score because it looks like you’re desperately seeking credit.
Best practices:
- Only apply for credit when you really need it
- If you’re shopping for a car loan or mortgage, do all your applications within 2 weeks. Credit bureaus will count multiple inquiries as just one
- Check your own credit report regularly (this doesn’t hurt your score)
5. Mix Up Your Credit Types
Having different types of credit, such as a credit card, student loan, or car payment, can actually help your score. It shows you can handle various kinds of financial responsibilities.
But here’s the key: only take on credit you can actually afford to pay back. Taking on debt just to improve your credit mix isn’t worth it if you can’t make the payments.
The Bottom Line
Building good credit takes time, but these habits will set you on the right path. Start with paying bills on time and keeping your credit usage low. These two strategies alone will make a big difference.
Remember, improving your credit score is a marathon, not a sprint. Stay consistent with these practices, and you’ll see your score improve over the months ahead.
This content is inspired by financial guidance from the Government of Canada. For more detailed information about credit scores and financial management, visit the Financial Consumer Agency of Canada.