Ah, credit score. It goes up, it goes down, but how the heck do we control it? Well, the experts over at Neo Financial know exactly how to make your credit score climb, so we’ve teamed up with them to gather 8 of their favourite tips to improve your credit score.

What’s Neo Financial? Good question. You may have seen their stickers around town on your favourite restaurants, shops, and cafes, but they’re more than just a pretty logo. 

In fact, they’re a Calgary-based fintech company that exists to simplify banking for you. From savings and cashback rewards, to easy budgeting and straightforward tips, Neo Financial can help you make the most out of your money. 

Now, let’s get back to improving your credit score!

Create a budget

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Before taking any swift action, you’ll want to understand the factors that affect your credit score. Once you get a good handle on what can cause your rating to swing positive or negative, you can create an honest budget. Your budget helps you get realistic about your spending habits so you can set achievable goals, especially when it comes to getting out of debt. 

There are a ton of popular budgeting tools and templates out there, and it’s important to pick a plan that is easy for you to stick to. Make sure you consider annual expenses, like taxes and insurance fees, as well as long-term and emergency savings for any of those unexpected expenses that crop up.  ‍

Pay down existing debt

Paying off your debt may feel overwhelming, but with your budget in hand, you’re better prepared to tackle debt head-on. Focus on catching up on any late credit card or bill payments. When possible, pay off your full balance and not just the minimum amount owed. Even if it’s just an extra $15-20 more, the more you put toward your debt each month, the closer you will be to paying them off in full. 

Pay bills on time

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Credit history makes up a good chunk of your credit score – in fact, it accounts for 35% of your score, and factors in how many bill payments you’ve missed and what you owe that’s outstanding. Paying down your balances and keeping your numbers as low as possible is one of the best things you can do to help your credit score go up over time. 

Even if you have a history of late payments, it’s not too late to start building a better history by making payments on time going forward. The Neo Card makes it easy to remember to pay your bills with timely notifications and automatic bill pay options. 

Focus on credit utilization

Credit utilization is how much you spend on your credit. It measures the debt you owe against the total credit available to you and is the second most important factor when it comes to determining your credit score. 

Ideally, you should aim to pay off your card’s balance in full each month, but the reality is that isn’t always possible. If you do carry a balance on your card, you should aim to keep it below 35% of your available credit. This means that if you have a credit limit of $5,000, you should only aim to use $1,500 or less to maintain a 30% utilization rate, and keep your credit score in check. 

Apply for new credit sparingly 

Every time you apply for new credit whether it’s a credit card, loan, or mortgage, a hard inquiry gets filed on your credit report. Hard inquiries have a limited impact on your credit score, however, if your score is already low and you are having trouble securing credit, applying for more credit can work against you. 

Multiple applications made over the course of a few months might decrease your chances of getting approved for new forms of credit because it makes lenders nervous that you might be living beyond your means. So if you are shopping for a new credit card, be selective about which card you choose to limit the number of inquiries logged, or consider a credit option that will help you build credit, like a secured credit card.

On the bright side, applying for new cards alone won’t hurt your score too much. Hard inquiries only affect your score for a maximum of 12 months, and usually, they only cost you about 5 points. The key takeaway though is to only take out the credit you need.  

Get a secured credit card 

Secured credit cards are backed by cash deposits. The deposit you make acts as collateral if you can’t make a payment, making it less risky for lenders to approve borrowers with poor or thin credit histories. The amount that you deposit will usually become your credit limit and most deposits start at $200, but can go as high as $2,000. 

Secured credit cards are a great way to build up your credit history if you have a thin credit file or no credit history, like if you’re new to Canada or you haven’t had a credit card before. They are also a good option if your credit score has been negatively affected by previous debts or bankruptcy declarations.

Start building your credit today

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Getting another credit card (or your first) can be a good thing – it opens up your credit and you can start building a credit score.  So long as you’re making on-time payments, this helps with getting a mortgage or other loans in the future! Neo makes it shockingly easy for you to understand when your payments are due so you don’t get hit with surprise by interest charges. Ultimately, helping you build up your credit which benefits you in the long run.

Keep old accounts open

After you pay off your credit card or line of credit, you may be tempted to close your old accounts and move on. But credit accounts all count as part of your credit history, and the age of your credit accounts affects how credit-worthy you appear to lenders. 

Closing a credit account you no longer use can also impact your utilization rate if you carry a balance on another card. It’s best to leave the account open, even if you don’t use the card to keep your utilization rate down.

So friends, there you have it. Building your credit takes time and effort, but with the right tools (like a handy-dandy Neo account) you can start taking steps towards a better (and simplified) financial future today! 

Ready to get started? Set up your Neo account with a click of a button, and you’ll automatically get $25 in your account (on them!).