How to Improve Your Credit Score with ADHD
Credit Scores in Canada and the USA
In both Canada and the USA, your credit score is a number that reflects your creditworthiness (i.e., how well you manage your debts). Your score impacts your ability to get loans, mortgages, and even certain jobs. Scores range from 300 to 900 in Canada and 300 to 850 in the USA, with higher scores indicating better credit health.
In Canada, there are two credit bureaus. They are Equifax and TransUnion. In the USA, the three major credit bureaus are Equifax, TransUnion, and Experian. These bureaus collect and maintain your credit information, which lenders use to assess your financial reliability. Improving your credit score can seem daunting, especially with ADHD, but with the right strategies, you can see your credit score. Here are some practical tips to help you boost your credit score.
Tips to Improve Your Credit Score
Set Up Automatic Payments
Why it helps: Late payments have the biggest impact on bringing down your credit score. Automatic payments ensure you never miss a due date. Partnering automatic payments with a plan for your money is key (more on that later).
This not only prevents forgetfulness, which is a common ADHD challenge but also keeps your payment history spotless, a crucial component of your credit score.
Create Reminders for Due Dates
Why it helps: Because on-time payments are the biggest factor in your credit score, if you can’t (or don’t want to) automate, reminders are your next best option to make payments on time. Remember that it takes time for your payments to clear so try to make them at least 3 days before they are due.
I love digital reminders (phone alarms, calendar alerts) to stay on top of due dates. This helps maintain to a routine, reducing the mental load and stress of trying to remember everything because we know we won’t. 😬
Keep Balances Low on Credit Cards
Why it helps: High credit card balances relative to your limit (credit utilization) can lower your score. A credit utilization rate above 1% and below 30% is best to help your credit score. Your utilization rate shows how much of your available credit you are using. If you have a credit card with a $1,000 credit limit and a balance of $300, you are using 30% of your available credit.
By regularly checking and paying down balances, you can reduce your credit utilization rate. The timing of your payments and your statement closing date are also important because the balance on your statement when it closes is what is reported to the credit bureaus. So, if you are carrying a balance, try to make payments before your statement close date.
Check Your Credit Report Regularly
Why it helps: Identifies errors or fraudulent activity that could harm your score. The earlier you catch these and work to get them corrected, the better.
Setting a quarterly reminder to review your credit report helps catch mistakes early. There are several apps you can use to check your scores and reports for free, and some financial institutions offer this service as well. When using the free services, be wary of the offers for credit cards and loans that will be advertised and pushed at you.
Limit New Credit Applications
Why it helps: Each application results in a hard inquiry, which can temporarily lower your score. While these don’t usually have a significant impact, it’s good to be aware of this when applying for credit.
Avoiding the impulsive decision to open new credit lines helps you focus on managing existing credit responsibly. The fewer cards you have the easier they can be to manage.
Pay Off Debt
Why it helps: Reducing overall debt improves your credit utilization ratio and score. But, if you pay off a loan you’ve had for a long time (especially if you don’t have a lot of long-term items on your report), this can actually cause your score to drop because it impacts your credit length.
Focus on one debt at a time using methods like the snowball or avalanche approach. This not only makes the task more manageable but also helps you stay motivated by seeing tangible progress.
Use a Budgeting Tool
Why it helps: I’ve said it before, and I’ll say it again: A budget that aligns with what is important to you and a system that aligns with how your brain works is key to long-term financial success, including getting an awesome credit score! If you aren’t sure where to start, you can grab my free budget tool, OR if you are self-employed, you can check out my free resources just for you! I’ve also got podcast episodes that can help you get going with your budget. Check out episode 5 for personal budgeting info and episodes 14 and 15 if you are self-employed.
If the word budget has you thinking about restriction, try focusing on changing that. Think about all of the things you’ll be able to accomplish when you have a budget that works for you that includes the things you love and your financial goals!
Parting Thoughts
Improving your credit score takes time and consistency. For those of us with ADHD, using tools and strategies to simplify and automate tasks can make a significant difference. By breaking down the process into manageable steps, you can steadily build a better credit score and financial future. Remember, every little bit helps, and you're capable of reaching your financial goals!
