How to get and keep a good credit score


Even though I still owe about $1500 on my credit cards, when I checked Equifax in May I had a 737 score. That has inevitably dropped a bit because I applied for another credit card (to be explained tomorrow, it’s only for a balance transfer, don’t stone me), but that should give you an idea of what my credit looks like.

Considering I had a high debt-to-credit ratio when my information was reported, and that I won’t have 2 full years of credit history until September, that is pretty damn good.

Many in the personal finance world are adamant that you shouldn’t worry about your credit score. Since no one wants to be in debt, there’s no reason to care right?

I understand their points, but I disagree to an extent. I agree that no one should maintain a good score just to be able to rack up consumer debt easily, like car loans and credit cards; after having to cut down on so much just to pay my debts and STILL not being done, I never want this experience again. However, good credit helps in numerous areas of life.

For example, people with good credit scores get better mortgage rates. In the greater Toronto area, the housing market is solid for now. The average home in my neighborhood costs $400 000, and I’m half an hour east of the city. You’d need a down-payment of $80 000 to even get considered for a mortgage in my area; very few people can cough up that kind of money, let alone a higher down payment. A good credit score can save a buyer thousands in interest over the years. Good credit can also drop the amount needed as deposits for services, allow you to rent an apartment (my credit is probably the number one factor in why M and I were accepted for our place), and even be the tipping point on a decision to hire you. If you are interviewing for a job in the financial industry and it’s a choice between you and someone with identical credentials and a better credit score, the other person is likely to be hired.

I haven’t done much right with my finances, but keeping my credit score high is something I’m proud of. Here’s how I did it.

I pay my credit card bills twice a month and pay more than the minimum.

I get paid biweekly, and I have just never mastered doing a monthly budget; it gets complicated. I prefer to work my finances on a two week basis. What I do with every bill over $30 is split it in half, and pay out to them twice. I pay my bills as soon as possible after I receive funds. Since they are paid every two weeks, I never incur late fees and I never get red flags on my report. Even with my phone bill, where I don’t know the exact amount of what I’ll owe until the middle of the month, I estimate. Also, with my credit cards, I have never paid minimums. Even when I was maxed out, I’d always put at least $300 from each pay towards my debt. It was partially because I was lying to myself (“see, I’m paying it off!”), and partially because I knew I just wouldn’t remember the due date. However, it has really helped with keeping my score high. There aren’t ever any lates on my report.

I limit my inquiries.

I have a friend who applies for lots of credit cards just to get the rewards they offer, and then never uses them beyond the initial gum purchase needed to activate it. I can’t do that. That’s not only for the obvious reason (recovering credit addict, no way), but because numerous inquiries wreak havoc on your report. When you apply for a lot of credit in one sitting, loan and credit companies assume you’re scrambling for money and need credit to dig yourself out. Hey, it happens, and they’re right to be cautious of that. I don’t ask for credit very often, but in the past month I have two inquiries; one from a bank about a credit card to transfer my balance and save some interest, and one from the realty company I’ll soon be renting from. That’s the most I’ve ever had on my report in one month. I actually have only applied for new credit every 9 months or so. Apparently that looks good.

I pull my credit report and look through it as much as possible.

I’m anal about my credit. It’s my baby. Seriously, ask my mom. I brag so much about my score that she knows my credit history by heart. So when  I get a  chance to check my history, I do it. At least every six months I send away for my report. I stare lovingly at all the R1s for a few minutes, and then start picking meticulously through every single word and number to make sure there’s nothing that I didn’t initiate. My mom was a victim of identity theft before I was born when someone got a hold of her SIN number; that’s all it took. Plus, once your identity is stolen, apparently it’s a special kind of hell trying to get people to believe that you didn’t mortgage a house in Nigeria using goats as collateral. Because of that, I check EVERYTHING with a metaphorical fine tooth comb. I haven’t had any issues as of yet, thank god. However, always look; if you catch erroneous entries early you can isolate the damage.

CONSTANT VIGILANCE!

The above is obviously just how I handle myself, but it has worked really well for me so far.

Does anyone else do things differently, or have some extra tips?

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8 responses to “How to get and keep a good credit score

  1. Do you pay to access your credit score every six months? I know most places give you a free credit report every year but the score is more annoying to come by.

    Our credit is also pretty good but I think that tapping into someone’s credit score multiple times really shouldn’t impact their credit score. That’s one of the reasons I was so weary about looking for mortgages through lenders.

    • I paid to get it in May, and it was the first time I had. Last year I sent for my credit report in the mail, and it took 6 weeks before I received it. This time I needed my report immediately, so I just bit the bullet and bought it online with a score attached as a bonus. It’s not something I would do every 6 months, maybe every 2 years or so.

      That’s the problem I find with inquiries as well- what if you’re shopping around for the best rate? It’s pretty annoying that inquiries knock the score.

      • I don’t know about where you are but here we are allowed to get a free credit report every year, which doesn’t impact your credit as far as I know.

        Apparently you can get free credit scores from a few websites nowadays—CreditKarma is one of them, I think.

        That’s exactly why we are annoyed with the mortgage thing. We are shopping for the best interest rate and every time we do that, they need to run a credit check. Bah!

  2. I agree…a solid credit score is important whether you are going to borrow money or not. In the states, I know, there are many utility companies that will charge you a downpayment before installation if you have a bad credit score. You can get better deals on cell phone carriers if your credit score is higher. Great point. And I applaud your efforts to get out of debt; you’ll get there soon!

  3. I don’t have any extra tips, but I have to say despite my struggles with my finances, I’ve always had a really good credit score, so I can celebrate that!

  4. The credit card churn (what most people who do it for the points call it) doesn’t cause as many problems to your score as you would think. If you already have great credit each application will drop it a little, but that ends up being offset by the increased credit limit and lower usage ratio. The effect also tends to dimish pretty quickly by the time the next churn happens (typically every 90 days for the hardcore churners).

    I’m not saying this game is for everyone, but used responsibly it can get quite lucrative. That being said, if you plan on taking out any major loans, such as a mortgage, it is highly advised to not try to churn credit cards.

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