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Improving your credit score

27 April 2012

There are many companies promising to improve your credit score. Unfortunately more often than not they are more than happy to take your money and do nothing in return. The fact of the matter is that there is no way to "erase" the bad stuff on your credit report, as many so called credit specialists claim to be able to do.

In order to tackle your credit score improvement in constructive way one must understand what credit score is and what affects the credit score.

First the credit score is result of mathematical calculation which takes into account your debt levels, your previous repayment history, any previous credit troubles etc. Credit bureau collects this information from financial institutions and other organizations such as service companies or anyone else that might be looking at issuing credit to you or whom you might own money. The mathematical algorithm is top secret but some factors are known which affect your score and as you know the score is very important piece of information whether you are applying for mortgage, HELOC or any other type of loan. So lets say your score is not a perfect one, and you are not alone these days, what can you do to improve it.

  1. Call credit bureau and ask them to send you your credit report. They are obligated to provide you with your own credit report free of charge. The two major credit bureaus in Canada are TransUnion and EquiFax. The best thing to do is to call both and get both credit reports because they might not be exactly the same. While the basic credit report will not show your credit score (or FICO score as it is also called) it is worth wile to review it and see if there are any errors on your file. If you find any contact them and have them correct this information. 
  2. Your credit score will also depend on the level of your debt compared to your available credit limit. If your credit cards or lines of credit are above 50% limit you will see your credit score suffer. You might want to call the creditors and ask them to increase the credit limit. Once your credit levels drop below the 50% of available credit you will see your credit score improving.
  3. Applying for credit too often will also lower your credit score. If many credit queries are made on your file the credit score goes down. In addition many lenders will be concerned that you might obtain too much credit compared to your income and will be very careful when considering whether or not to accept your application. If you deal with mortgage agent he or she can shop many lender with only one query on your file saving your credit score and giving you chance of better mortgage. If you have many inquires stop shopping around for credit and in 6 months or so your credit score should improve. Then work with mortgage agent to find you your perfect mortgage deal.
  4. If you have any outstanding obligations on your credit report such as overdue bills etc your credit score will be hurt badly. Pay them off to see the score go up. In addition most lenders and mortgage companies will not even consider extending the mortgage loan to you before these obligations are cleared so it is very important that you deal with these first.

And best of all you can do the above yourself free of charge, without spending thousands of dollars on some so called "credit doctor" most often for no result at all. 

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Walter Pawlowski Ontario Mortgage Agent M11002486