How your savings account can improve your credit score

Pop quiz: do you know your credit score? Many Canadians don’t. And that’s okay, most of the time. But when you apply for a mortgage, loan, line of credit or credit card, your credit score is a big part of the reason you get approved or denied.

Your credit score and full credit report live in the databases of Canada’s two credit reporting agencies, Equifax Canada and TransUnion Canada. You can access them free of charge from Borrowell. Everyone (that includes you!) should check their credit report for errors about every six months. Your request will not affect your credit score.

Whatever your credit score is, nurture and protect it. Here are five things that can give it a boost.

1. Don’t be late

We’ve all had that moment. You’re scrolling back in time through your email and come across a credit card bill from last month. You open it up and realize you didn’t pay it. Now you’ve missed the payment due date. Does it matter? Well, yes. Credit bureaus treat missed payments as a very big deal. If it keeps happening, it can have a big impact on your credit score.

The thing is, there’s such an easy fix. Tell your credit card company you want to set up automatic payments directly from your EQ Bank Savings Plus Account. Here’s how. You’ll never miss a payment due date again. Now, get back to sorting through that inbox.

2. Follow the 35% rule

Make sure you have enough credit to meet your needs. Bumping up against a card’s credit limit all the time can damage your credit score. As a general rule, use 35% or less of all your available credit – which includes loans, lines of credit and credit cards.

Need more credit? If you’ve been a good customer who keeps up with bill payments (see above), credit card companies are often happy to increase your credit limit. It may be as simple as calling them up and asking.

Also, remember that variety is the spice of life. Having a mix of loans, lines of credit and credit cards is actually better for your credit score than having, say, all credit cards. Just don’t use more credit than you can consistently pay off.

3. Plan ahead

Big expenses in your future? A wedding? A renovation? The purchase of a small tropical island? Set up enough financing in advance, because another thing that can affect your credit score is a flurry of credit checks. It’s okay to get a few quotes – for example, for a car loan or mortgage. As long as they happen within a two-week period, the credit reporting agencies group them together. What you don’t want is a bunch of declined applications in a row. Desperate is never a good look.

4. Wait … and wait some more

Credit scores don’t improve overnight. The longer your credit history, the better. And, by sustaining good credit habits, you’re slowly and steadily demonstrating your creditworthiness.

Keep in mind that the credit reporting agencies especially like credit you’ve had for a while. So maybe keep that credit card you got in university and use it every so often even if it’s no longer your primary card. And think twice before accepting an offer to transfer your balance to a new card at an attractive introductory rate, because new credit doesn’t rate as high as old credit.

5. Build your savings

Savings don’t directly affect your credit score, but if you have them, you won’t run short and miss paying a bill.

Start by accumulating an emergency fund in your Savings Plus Account. Then make a plan to add steadily to your savings in other accounts, such as a Tax-Free Savings Account (TFSA).

Having more assets to balance against your debts can help you the next time you apply for credit. Even better, building your savings means you won’t have to borrow as much when you’re ready to put an offer in on that island.