This one thing will have the biggest impact on your credit score!

When it comes to building your credit, there is one thing that will have the biggest impact on how quickly you can increase your score. Paying bills on time. 

It may sound simple, but it's surprising how many people do not pay their bills on time, and don't realize how much this is affecting their credit score. Paying bills on time accounts for 35% of your credit score! So, if you're asking yourself, how can I build my credit score quickly, paying bills on time is crucial.

How and why does paying bills on time impact my credit score?

Your credit score is a three-digit number between 300 and 900 that lenders use to help them decide how likely it is they'll be repaid on time if they lend you money, whether that's in the form of a loan, or a credit card. The higher your score, the more likely it is that you are going to pay the money back, and therefore the easier it is not only to qualify for loans and credit cards, but to do so at the lowest interest rates.

If you don't pay what you owe back on time, your credit score will drop, letting lenders know that you're more of a risk. Lenders don't want to give money to people who are not going to pay it back. So, as your score drops with every missed or late payment, your chances of future credit approval will also drop, and the interest rates you will be offered will rise.

How can I work on increasing my score?

If your credit history is not where you want it to be because you've missed or made late payments in the past, you're not alone. In fact, more than 1 in 10 Canadian households are late or skipping debt payments (Source).

To build your credit score will take time, and commitment. You also need to have the right tools to be able to do so. The sooner you address the issues that are dragging your score down, the faster your credit score will go up. You can increase your score by taking several steps:

1. Establishing a track record of paying bills on time. Refresh Financial's flagship product is a Credit Builder Loan that allows you to make regular payments towards a loan that is reported to both credit bureaus. As mentioned above, paying your bills on time makes up 35% of your credit score!
2. Add to the Credit Builder Loan a Secured Card from Refresh and then make payments on time! The common theme here is that you need to have credit in order to pay it back which helps to build more credit. By mixing up your types of credit (a loan is installment credit whereas a secured card is revolving credit) you will also impact your score as having different types of credit makes up 10% of your score.
3. Start making regular payments towards existing debt. It's just as important to get that existing debt paid down. The amount of your available credit that you use accounts for 30% of your credit score!
4. Don’t forget your other bills! While paying bills on time such as electric, cable and gas bills do not positively impact your score, defaulted bills and those that have been sent to collections will negatively impact your score and can remain on your credit report for several years.

At the end of the day, if you only take away one thing from this article it is that you MUST pay bills on time if you want to increase your credit score. That includes your cell phone, cable, electricity and gas, mortgage, car loan, personal loans and credit cards. Pay the amount you owe on time!