Edited: 16th May

Once viewed as a necessity when applying for a mortgage, credit score now factors into various aspects of life - renting an apartment or office, paying for utilities, buying a cell phone, the amount you pay for insurances, and employment decision.


“So what?” you ask.

We can see now businesses are interrupted, a variety of lending solutions will quickly, if not already, surface to help support employees, freelancers, business owners during this time. The terms and conditions of those loans, e.g. length of time, interest rate, amount of penalty for missed payments, will be determined upon your credit scores. The credit score of either the individuals’ (because they are guarantors to pay off the debt), or that of the businesses themselves. However, most likely the individuals’ credit scores will be used heavily.

So, we need to always be on the lookout for improving our own credit score to get the most favorable terms, if and when we need them the most.

Here are tips to help you improve and maintain a good credit score:

1. Know which bills must be paid on time.

One bill that goes more than 30 days past its due date can drop your credit score by 40 points. Worst of all, it can stay on your credit report for seven years! If you are in a cash pinch and can't pay all your bills on time, prioritize mortgage, car loan and credit card bills that report late payments to credit agencies.
Utilities and medical organizations generally don't report a delinquency until your account is sent to a collection agency.

However, it is still a good idea to pay a small amount toward the balance. Additionally, proactively working out a payment plan with these organization will go a long way of not being sent to collection.

2. Watch revolving credit balances.

Each credit card has a credit ceiling. This credit limit is compared to how much of it you use. The higher amount of the credit limit you use, the lower your credit score. Even if you pay the bill in full each month! Ideally, try to keep the spending balance less than 20 percent of your credit limit. If your routine spending is higher than this, consider requesting a higher line of credit, but do not use it. The sole purpose of this request is to create a higher credit score.

3. Pay off debt.

Current debt balances account for as much as 30 percent of your credit score. When you consider this and the high-interest rates that come with debt, it's important to get those balances to zero as soon as possible. Your debt-to-income ratio (total debt divided by your total income) doesn't directly affect your credit score, but it's a key metric used by lenders when determining loan eligibility and interest rates.

4. Add new debt only when necessary.

Adding new debt can reduce your credit score in a few different ways: your debt profile increases, your debt-to-income ratio rises, and even the credit inquiry itself can take a chunk out of your score. If you have a relatively short credit history, too many credit inquiries will affect you even more.

5. Consider keeping dormant credit cards open.

Have an open credit card that you've paid off or have never used? Your instinct might tell you to close the account. But keeping it open may actually help your credit score. An active credit card in good standing for a long period of time is already an asset. Plus, the additional unused credit limit on your books lowers the ratio of spending to the total credit limit and improves your score.

6. Actively monitor your credit reports.

You can get a free credit report from each reporting agency every 12 months on the Annual Credit Report website. These reports tell you everything you need to know about items impacting your credit score. Reviewing these items on a routine basis is an important exercise to ensure a correct report. If you find a mistake, you can work to get it removed and improve your score.