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How to Increase Your Credit Score By Lowering Your Debt

Only 40 per cent of Canadians know their credit score and only 21 per cent regularly check their credit report – these are some recent findings from a new Capital One survey. Although many people may hear about improving their credit score, they may not be aware of the ways it can be negatively affected.

How can my credit card debt affect my credit score?

TransUnion, a credit reporting agency, reports that only four in 10 Canadians understand the importance of making more than a minimum payment toward their debts. Our LITs make some excellent points in this podcast about what you may be doing to sabotage your credit score, and how you can fix it.

You’re using too much of your available credit. Your overall credit score is made up of five components:

  1. Payment history
  2. Debt load
  3. Age of credit
  4. Mix of credit (the types of credit you’re carrying)
  5. Credit utilization, which is the amount you actually use on your credit card in proportion to your limit.

To maintain a good credit score, you should use 30 per cent or less of your available credit. For example, you may have a $5,000 credit limit, but if you only use $1,500 and pay it off every month, your score will not be impacted.

You’re only making minimum monthly payments. Having multiple credit cards near their maximum limit, even if you make minimum monthly payments, can lower your credit score. This can signal to lenders that you are a risky borrower and more likely to default on your loan. Look for ways to pay more then the minimum monthly payment to decrease your credit utilization. Use this tool to see how much credit you’re using.


Your payment history isn’t the best.  As stated above, those five main factors work together to provide your credit score, but the biggest factor is your payment history, which accounts for 35 per cent of your overall score. Canada’s credit reporting agencies, TransUnion and Equifax keep your records on file for up to seven years, which gives lenders an overview of your payment reliability. To improve your score over time, the best thing you can do is:

  • Pay your bills on time and in full each month.
  • Pay off your debts to free up more money. Use this debt repayment calculator to see your options.
  • Create a budget and consider using a money management app com so each bill is accounted for.
  • Find a way to earn more income.

Does missing a credit card payment immediately affect your credit score? Check out our podcast to more about credit reports and credit scores.

Join the conversation and look for more #FinLit and #CreditControl tips on Twitter.

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