If you are looking to make a large purchase, either now or in the future, there are a few numbers you should know. Your income, how much money you need, and, most importantly, your credit score. Financial institutions calculate your credit score, which determines what type of interest rate you will receive on a mortgage, loan, or credit card. Other institutions use it to calculate your insurance premiums as well, so there are many benefits to knowing your score and how to improve it.

In Canada, credit scores range from 300 to 900. There are online resources available where you can check your score—generally, a score of 700 or higher will get you the best rates.

Here are a few tips from our experts on how to build your credit rating:

• Treat your credit cards like cash; deduct money from your chequing account every time you make a purchase
• Try to use less than 35% of your available credit; using a lot of your available credit can make lenders see you as a higher risk
• Always make your payments on time and contact your credit card company if you think there might be an issue
• Pay the entire balance of your credit card each month; if you’re not able to make the full payment, make at least the minimum payment
• Limit the usage of credits to two or three maximum and select cards with no annual fees, 30-day grace bill periods, rebate incentives or other incentives (airline mileage, auto points, etc.) programs and single-cycle billing
• Use your credit card with incentives for regular expenses such as groceries
• Limit the number of credit applications you are doing at any one time

If you’ve missed payments, had accounts go into collections, or filed for bankruptcy, your score might need some extra work. Establish a budget that includes a monthly debt repayment plan for your maxed-out cards. As you pay off balances, call the creditor and ask them to close your account so that you are not tempted to use the card again. If it’s absolutely necessary to own a credit card, enrol in a pre-paid program where you load money onto the card for purchases like you would with a gift card. Once you’ve reached your set limit, the card will not work.

For more information about your credit score, visit the Financial Consumer Agency of Canada, or contact the Cowan Financial Services team at 519-651-6660 or 1-877-899-2194, email: wealthmanagement@cowangroup.ca.