How to Build a Stronger Credit Score in 2024

A new report has found that most people are worried about the cost of living. More than half of Canadians are $200 away from not making their responsibilities each month, and one-third of these respondents don’t earn enough to cover their bills. 

Missing a bill can spell big trouble for your credit score. Your score may drop, even if you only miss one by mistake. A low score can interfere with your chances of qualifying for a new mortgage, line of credit, or personal installment loan. 

While you may still get approved, you may wind up paying more for these loans. Here’s how you can handle your credit score in the upcoming year, whether you’re looking to apply for a line of credit in Canada now or sometime in the future.

Get into Budgeting

Budgeting is one of the best habits you can make in the new year. This plan organizes your spending into the essentials and the non-essentials.

By understanding your essentials, you can earmark money for your priorities. The non-essentials are the perfect sources of extra cash. Cutting back on splurges may seem like a no-brainer, but there are plenty of other not-so-obvious expenses you can reduce. 

Delay Big Purchases

If money’s tight, a big purchase isn’t a good idea if you can help it. Of course, sometimes your fridge will break down or your water heater will stop working. In these situations, you may still put these urgent expenses on your line of credit. 

Otherwise, wait until your finances are in order to make non-essential purchases, like a vacation or new sound system, even if that means saying no to a big sale. When you don’t need something, buying it on sale only costs money, not save it.

Cover the Minimum

At the very least, you should consistently cover your minimum payments. As these preclude late fines, they’re an important bill to hit. If you don’t, your creditor may share your late payment with a credit bureau, and you will see your score drop once it’s on your record. 

While you can’t predict the exact damage a late payment causes, you can expect the damage to be worse the later you are, and the more late payments you make.

Budget for More Than the Minimums

All that hard work you did to find unnecessary spending has its purpose. You can pour this money into your debt, paying more than the minimum. 

Ideally, you can pay off your balance in total. However, paying as much as you can is the next best thing. This strategy helpsyou pay off debts faster and pay less interest. Lowering your credit card and line of credit balances may also help you reduce your utilization ratio.

Ask for a Credit Limit Increase

Increasing your credit limits is another way you can reduce your utilization ratio. That’s because your ratio is a quotient. In other words, you divide your balance by your limit, with the aim of having a single-digit figure. 

Lowering either number in this equation will have an effect onyour ratio. You’ll see the biggest impact if you can reduce both at the same time. 

Of course, only increase your limits if you know they won’t tempt you into spending more. You don’t want to add debt in the name of lowering your score.

Get Help

If following the tips above sounds impossible, it’s time to ask for help. Get in touch with a free credit counsellor to talk about your options. These professionals can devise a debt-payment plan that suits your capabilities. 

Otherwise, stick with it! Your hard work will pay off in the new year!