Why a Healthy Credit Score Matters
- Reena Visani
- 4 days ago
- 4 min read
A healthy credit score is critical. It can mean the difference between being approved for a mortgage or having your application declined.
For some, a poor credit score can delay—or even derail—the dream of homeownership. That’s why it’s always a good idea to regularly check your credit score and credit report. Our guest blogger, Reena Visani, Mortgage Agent Level 2, of Affinity Mortgage Solutions Inc – DLC, breaks down the five key factors that impact your credit score and shares practical tips to help improve it.
Five factors that impact your credit score
PAYMENT HISTORY (35%)
Payment history carries the most weight. This includes late payments, bankruptcies, collections, and judgments. Lenders want to understand how likely you are to repay the credit they are considering offering you, and they assess this by reviewing how you’ve managed past credit obligations.
CREDIT UTILIZATION (30%)
Credit utilization measures how much of your available credit you are using. A widely accepted rule of thumb is to keep your total utilization across all credit products below 35% of your available credit. Lower balances generally reflect better credit management.
CREDIT HISTORY (15%)
This refers to how long your credit accounts have been open and established. In general, creditors and lenders like to see that you’ve been able to properly handle credit accounts over a period of time. Credit accounts with a longer history showing responsible credit behaviour will reflect positively on credit scores. Newer accounts lower your average account age and may temporarily impact your score.
CREDIT MIX (10%)
Credit mix looks at the diversity of credit products you have, such as credit cards, installment loans, mortgages, and lines of credit. A healthy mix shows lenders that you can manage different types of borrowing. If you have too few – or don’t have a mix of different types — it could negatively impact your credit score.
NEW CREDIT (10%)
This factor considers how many new accounts you’ve opened and how many credit inquiries you’ve had recently. Having too many new accounts may indicate to lenders and creditors that you’re taking on a lot of new debt and may be a high-risk borrower.
Tips to improve your credit score
When discussing credit scores, it’s just as important to review your credit report, as errors or outdated information can drag your score down. In today’s higher interest rate environment, a strong credit score is one of your best tools for negotiating a competitive mortgage rate—and potentially saving thousands of dollars over the life of your loan.
Before submitting a loan application, consider these steps to help boost your score:
Pay All Bills on Time
Payment history has the biggest impact on your credit score. Even one missed payment—such as a cell phone or credit card bill—can remain on your credit report for up to six years. Setting up automatic payments can help ensure nothing is overlooked.
Keep Credit Card Balances Low
Since 30% of your score is based on how much you owe, aim to keep balances as low as possible. You don’t need to wait until your due date to make a payment. If your balance is approaching the 35% threshold, making an early payment can help maintain a healthy utilization ratio.
Check Your Credit Report for Errors
Review your credit report carefully for mistakes such as incorrect balances, outdated accounts, or fraudulent activity. Correcting errors can lead to a quick improvement in your score.
Keep Your Oldest Accounts Active
The length of your credit history plays a significant role in your score. Avoid closing older accounts—especially your oldest credit card—as this can shorten your average credit age. Keeping these accounts open and in use helps maintain a strong credit profile.
Maintain a Healthy Credit Mix
Lenders like to see that you can responsibly manage different types of credit, such as credit cards, installment loans, and lines of credit. A balanced mix can improve your score—just be mindful not to open multiple accounts at once and manage them responsibly. Avoid taking on unnecessary debt.
Final Thoughts
It’s a good habit to check your credit score and report at least once a year. Improving your credit takes time, so patience and consistency are key. Even if you’re not planning to borrow anytime soon, maintaining a healthy credit profile puts you in a stronger financial position for the future.
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