A credit rating is something that can take years to build up and can also fall very quickly. Knowing how to build and maintain an excellent credit score is critical for future purchasing. Here are some dos and don’ts on how to build, maintain, and protect your credit score.

What builds your credit score?

It is important to know how to build and maintain your credit score, here are some valuable tips:

1. ALWAYS pay your credit card, mobility, and loan payments on time.
   a. It is not a well-known fact that most mobility providers report to the credit reporting agencies, therefore, late payments on your accounts could affect your score.
2. Maintain a good debt service ratio (expenses vs. income):
   a. Pay more than the minimum amount on your monthly credit card statement whenever possible. Otherwise, you’re paying little more than interest.
   b. Try to keep your credit card balances well below the limit. The higher your balance, the more impact it has on your credit score. Never exceed your credit limit.
3. Monitor the number of credit inquiries on your credit bureau.
4. Make sure you have reported credit history. Being considered as “New Credit” and having no reported credit history will result in higher interest rates, need for a co-signor, or a larger down payment. Potential lenders want to see evidence that you can pay back money borrowed.

What damages your credit score?

There are a number of activities that can lower your credit score, here are some beneficial tips:

1. NEVER overextend your credit exposure. Failing to make your payments in a timely manner will result in negative reporting and your credit score can decline quickly, for example:
   a. Consistent poor payment history
   b. Accounts sent to collections
   c. Court-ordered judgments (debts owed due to lawsuits)
   d. Debt management programs (debt consolidation)
   e. Consumer Proposals (legal agreement set up by an Insolvency Trustee between you and your creditors where the latter agrees to let you pay off a percentage of your debt)
   f. Bankruptcy (you surrender your personal assets to a licensed Insolvency Trustee in exchange for the elimination of your debts)
2. Numerous credit inquiries reported can hurt your credit score. While not all inquiries are viewed negatively (soft inquiry), when applying for a loan, having several inquiries by various lenders will be considered hits against your credit score (hard inquiry), so it is best to consciously limit the number of new inquiries made at the time of your application.

By demonstrating responsible borrowing habits over time, you can improve your credit score and access lower interest rates on loans. To learn more about your credit history, you can request your credit report online, in person, by telephone or mail by contacting Equifax Canada or TransUnion.