The 1 Secret Ingredient to Improve Your Credit

Every week over at the One Stop twitter channel we share three success stories. These stories range from people who obtained funds to purchase a home to retirees looking for travel money to small business entrepreneurs.

Every situation is different. Some people are in a financial crunch because of a sudden illness. Others are up to their eyeballs in payments from credit cards, vehicles and yes, their homes.

When we share the success stories, one of the first things people look at is the credit scores of the individuals involved. It’s a cycle: weak credit leads to a lack of control over large purchases, but it’s often large purchases and failing to keep with up with the payments that leads to bad credit.

Well, there’s a secret ingredient to improve your credit that we preach to our clients all the time.

But first, what are a couple not-so-secret credit-improving ingredients?

Pay Your Bills

Whether it’s taxes, your phone bill or your mortgage, if a bill comes through the door, the best way to deal with it is to deal with it.

Immediately.

Your credit takes a hit when Equifax Canada and Trans Union are notified of delinquent payments. Why do we wait to pay our bills? Because other things get in the way. Well, putting off your payments won’t make them go away, and if you truly want to improve your credit, then your bills will become your priority.

Let Your Credit Card Collect Dust

Ok, you might not be able to put your credit card in the freezer like a friend of mine did back in college, but if you can under-utilize your credit it looks good and will eventually boost your rating. For instance, I have a card I use every day that I immediately pay off (sometimes within five minutes of a purchase), and I have another one that I haven’t used for two years.

It’s just sitting here on my desk, collecting good credit. Wait, not collecting credit. Wait – you get the idea.

Alright, those are two pretty simple ways to improve your credit. But the one ultimate secret we all have a tough time grasping?

Time

Improving your credit rating takes a respect for time. Both short term – paying your bills quickly; and long term – accumulating good credit.

When you pay your bills immediately it’s like putting deposits in the bank that grow. The more time, the greater the investment. It’s not enough to pay your bills quickly just once – the repeated habit of getting your payments out of the way will accumulate over time and take bigger and bigger bites of your poor credit.

Time is often the mitigating factor in all of our financial concerns. We accumulate poor credit because we can’t wait to make a large purchase. We essentially borrow from the future in the hopes that the future will never arrive.

Well, the future always arrives whether we like it or not.

It’s up to you whether that’s a good thing or a bad thing.