In last week’s post we spoke about the fact that there are so many credit report providers out there, all providing different results and chances are, none of those results are the credit score lenders see when you apply for a mortgage, credit card or car loan.
So how are you supposed to optimize your credit score when you don’t even know what it is?
The answer is, by focusing more on your overall ‘credit hygiene’ rather than on any one particular score.
As with dental hygiene, preventative maintenance to ensure your teeth and gums are the best they can be at all times, having a similar routine for your personal credit history can be equally important to avoid problems when you least need them. If you are always employing best practices, you are optimizing your credit score and your overall credit profile, regardless of who is checking.
Here are some credit hygiene tips:
Never go over limits – leave some room: When you have a credit card or Line of Credit hovering around its limit, you are at risk of going over, which is not a good thing for your credit score. Even when you deploy a balance transfer promotion, or some form of interest-free period, you should leave room at the top. It’s like when ordering a coffee, leave room at the top of the mild/cream, even if you take it black, avoid spillage.
Accept all offers of increased limits: You should usually welcome credit limit increases. You look healthier and stronger to the casual reader, because your limits have some heft to them. You instantly reduce your percentage utilization of credit with an increased limit and this often results in a higher credit score. Equifax Canada states percentage utilization has a 30% weighting on your personal credit score.
Spread around your balances: When maximizing your personal credit score, you should look at your utilization of available credit for each individual credit facility. If your goal is to maximize your score at all times, but you do carry credit balances, try to spread it around, rather than cluster it all on one card. One way this can arise, is when you use balance transfer promotions to reduce interest expenses. Read more….
Original article: www.canadianmortgagetrends.com
