How Long Does it Take to Improve a Credit Score?

What is a credit score?

Let’s begin by reviewing the definition of a credit score. A credit score is a number that lets financial institutions know if you’re able to repay a loan on time. In other words, the banks check your credit score to decide whether or not to grant you a loan. Credit scores are between 300 (the lowest rating) and 900 (the highest rating).

A credit score below 659 is considered poor. If your credit score is between 300 and 559, your loan applications will most likely be denied. Equifax  and  TransUnion are the two credit rating agencies in Quebec. Both organizations offer free credit reports. Simply submit your request online. For more information about the factors used to determine your credit score, please read Five Factors that Impact your Credit Score.

How long does it take to improve a credit score?

Improving a poor credit score depends on a number of factors and your personal situation. It could take a few months or even several years.

• A late payment could remain on your credit report for up to six years.
• However, a consumer proposal disappears after three years, once you’ve met the obligations outlined in the proposal.
• The same is true for a voluntary deposit. It remains in your credit report for three years and is removed once you make your final court payment.
• Bankruptcy is removed from your credit report six years after your discharge date (a few years longer if this is your second bankruptcy).

What steps must I take to boost my credit score?

Fortunately, there are several strategies for boosting your credit score.

Make a budget

As is often said, making a monthly budget will give you an insight into the expenses that got you into debt and allow you to change course. Use our free online budgeting tool to calculate your budget.

Pay off your credit card debt every month

One of the ways to boost your credit score is to pay the balance of all your credit cards every month. If you make only minimum payments, you’ll have to pay high interest on top of the amount that you owe. Make do with one credit card. If you’re paying the balance of one credit card with a second card, you’re creating an endless cycle of debt.

Meet the payment deadlines for your bills and loans

Be disciplined. As mentioned above, if you don’t pay your bills and loan payments on time and in full, you’ll have to pay interest. If you’re having trouble meeting the deadlines, schedule automatic withdrawals.

Use only a portion of your credit limit

Even if you qualify for a $3,000 credit limit, you should aim to use no more than half of what is offered to you. Reaching your credit limit each month will negatively affect your credit score.

Build a long-term credit history

If you keep your old accounts open, you’ll build up a good credit history, which lenders always appreciate. This will also reflect your financial stability.

Check your credit score

Request a credit report every year and check that there are no errors. TransUnion or Equifax will send your credit report in the mail once you fill out an online request form.

Negotiate with your creditors

Your debts have a negative impact on your credit score. If you’re unable to pay back all the amounts owing on time, contact your creditors and see if they can offer an interest-free payment arrangement over several months.

Limit your loan applications

Regardless of whether your loan applications are accepted or denied, submitting several credit applications in a short space of time can signal an urgent financial need to lenders that can negatively affect your credit score. Each credit application usually generates a credit check that can affect your score.

Demonstrate your financial stability

To continue strengthening your credit score, show your future lenders that you have a stable lifestyle by keeping the same address and the same job.

Start borrowing again

Start out with a loan that you can easily repay such as a credit card with a security deposit. Over time, this will show your creditors that you’re reliable.

In short, your credit score will improve over time if you adopt good financial habits and are patient. However, if you’ve accumulated debts and can’t see a way out, call on one of our licensed insolvency trustees. They can help you to find solutions.