The secrets behind a good credit score

Unless you have a very specialized education, some of the things you’ve never learned in school but that you’ll need all your life pertain to your credit report or rating. Which factors are considered? What does my score mean? How can I improve or maintain my credit rating? Let’s review the most important elements you ought to know on this matter.

Credit file, rate and score

The relationship between these 3 elements is the first step where a lot of people get confused: your credit report contains multiple informations (personal, banking, related to a bankruptcy, etc.) compiled by your creditors (institutions, businesses or individuals) past and present. These same lenders give you a quotation or a rate (not to be confused with the credit score) that summarizes the overall reimbursement conditions of the loan you got from them. Upon the analysis of your credit report and of the rates given by your creditors, credit bureaus (Equifax and Trans-Union in Canada) can give you a credit score ranging from 300 to 900 points.

Best practices

That being said, we can now present the best way to keep a good credit report, receive good quotations and thus maintain a decent credit score. The following elements are not an exhaustive list but a small sample of what are generally considered best practices when it comes to credit management. Restrain yourself from asking for multiple loans to many creditors! Refusal is one of the most damaging thing for your credit score. Paying your credit card in full and on time is a good thing, but you can go even further than that: the range you want to stay to please credit bureaus is a balance corresponding to 35% or less of your limit. In other words, using fully your credit card (or worse, your cards) every month harms your credit score, even if you bring it back to 0 $ within the prescribed timeframe.  Finally, you shouldn’t feel obligated to accept every credit offer, including those coming from your bank. Credit bureaus like stable people (in terms of employment and home address, among other things) with relatively ancient credit accounts because they are more predictable.

There is a lot more to learn on credit reports and scores, but keep this in mind: don’t disperse yourself, don’t go asking for loans every chance you get and keep your credit balances relatively low, even if you intend to reimburse them in full in a short time. That should make you a model citizen in the eyes of credit bureaus.

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