Monitoring your payment history
Your payment history is the most important factor for your credit score.
To improve your payment history:
- always make your payments on time
- make at least the minimum payment if you can’t pay the full amount that you owe
- contact your lender right away if you think you'll have trouble paying a bill
- don't skip a payment even if a bill is in dispute
Get electronic alerts from your financial institution
Your financial institution may send you an electronic alert when the credit available on your credit card falls below a certain amount.
These alerts may help you manage your day-to-day finances, such as your credit payments.
Learn more about these electronic alerts.
Using credit wisely
Don’t go over your credit limit. If you have a credit card with a $5,000 limit, try not to go over that limit. Borrowing more than the authorized limit on a credit card may lower your credit score.
Try to use less than 30% of your available credit. It’s better to have a higher credit limit and use less of it each month.
For example, suppose you have a credit card with a $5,000 limit and an average borrowing amount of $1,000. Your credit usage rate would be 20%.
If you use a lot of your available credit, lenders see you as a greater risk. This is true even if you pay your balance in full by the due date.
Improving your credit history
The longer you have a credit account open and in use, the better it is for your score. Your credit score may be lower if you have credit accounts that are relatively new.
If you transfer an older account to a new account, credit bureaus consider the new account as new credit.
For example, some credit card offers come with a low introductory interest rate for balance transfers. The new card on which you transfer your current balance is considered a new credit product.
Consider keeping an older account open even if you don't need it. Use it from time to time to keep it active. Check your credit agreement to make sure there is no fee if you keep the account open.
Limiting your number of credit applications or credit checks
Credit inquiries, also known as credit checks, count toward your credit score. It’s normal and expected that you'll apply for credit from time to time. When lenders and others ask a credit bureau for your credit report, they record it as an inquiry.
If there are too many credit checks on your credit report, lenders may think that you’re:
- urgently seeking credit
- trying to live beyond your means
To control the number of credit checks on your report:
- limit the number of times you apply for credit
- get your quotes from different lenders within a 2-week period when shopping around for a car loan or a mortgage. Credit bureaus will combine and treat your inquiries as a single inquiry for your credit score
- apply for credit only when you really need it
"Hard hits" versus "soft hits"
"Hard hits" are credit checks that appear on your credit report and count toward your credit score. Anyone who views your credit report will see these inquiries.
Examples of hard hits include:
- credit card applications
- some rental applications
- some employment applications
"Soft hits" are credit checks that appear on your credit report. They're recorded on your credit report but only you can see them. These credit checks don't affect your credit score.
Examples of soft hits include:
- requesting your own credit report
- businesses checking your credit report to update their records about an existing account you have with them
Diversifying your credit
Your score may be lower if you only have one type of credit product, such as a credit card.
It's better to have a mix of different types of credit, such as:
- a credit card
- a car loan
- a line of credit
A mix of credit products may improve your credit score. Make sure you're able to pay back any money you borrow. Otherwise, you might end up hurting your score by taking on too much debt.
Related links
- Making a plan to manage your debt
- Getting help from a credit counsellor
- Credit report and score basics
