Tally up some points to improve your credit score

Life is full of little tests, and the choices you make when you use credit are always being scored.

Your credit score determines your credit worthiness to a lender. You get points for actions that demonstrate you can use credit responsibly. You lose points for things that show you have difficulty managing credit.

But don't panic, there are ways to improve your score, like this:

• Pay bills on time

“The most significant factor influencing your credit score is your payment history,” says Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada (FCAC). “This includes when you pay your bills, any late or missed payments and whether any of your unpaid debts were sent to a collection agency,” says Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada (FCAC). “To improve your credit score, pay your bills on time and show lenders that you use credit responsibly.”

• Use available credit wisely

Your credit score is influenced by how much of the available credit you actually use, not just your credit limits. It is wise, says Tedesco, to use less than 35 per cent of your available credit. When you use a large percentage, lenders see you as a greater risk, even if you pay your balance in full regularly.

• Length of credit history

The longer you have had accounts open and used them responsibly – such as a credit card or a line of credit – the better it is for your score.

• Number of inquiries

When lenders ask for your credit report, it is called an inquiry. This is usually done when you apply for new credit. If there are too many inquiries on your report, lenders may be concerned because it can seem like you are desperately seeking credit. To maintain a good score, limit the number of times you apply for credit over a short period of time.

• Types of credit

To improve your score, you'll need to show responsible usage of several credit products, such as a credit card, car loan or a line of credit. Responsible usage means making sure you can afford to pay back the money you borrow. Otherwise, you could end up hurting your score.

More information is available on the FCAC website at itpaystoknow.gc.ca.

www.newscanada.com