Financial Friday #68: 10 Need-to-Know Fast Facts About Credit Scores
10 Need-to-Know Fast Facts About Credit Scores
(2-minute read)
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Equifax and TransUnion are the two credit-reporting agencies in Canada and your credit score will vary between the two. Lenders may check one or both agencies when you apply for credit.
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You can get a free credit report (not your credit score) directly from Equifax or TransUnion once per year. Your credit score is calculated based on the data in this report. Some financial institutions offer customers their credit score for free, or you can sign up with one of the many companies that provide credit scores online.
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Credit scores range between 300 and 900 with the Canadian average being 650.
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Your credit score is used for a lot more than just borrowing money; insurance companies, mobile phone providers, car leasing companies, landlords and employers may all require your credit score to make decisions.
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Five factors affect your credit score: length of credit history, credit utilization or how much of your limit you have used, the mix/types of credit you hold, the frequency you apply for credit, your payment history.
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Mistakes and omissions are not uncommon and is a good idea to check the details of your credit report. Both agencies have a process to report errors and get them corrected.
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Credit scores of 700+ are considered "good" and offer a higher chance of loan approval, greater borrowing limits, and lower or “preferred” interest rates and insurance premiums.
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Credit scores are continuously evaluated and adjusted. If you have “errored” in your past, the damage is not permanent! Your score can be raised/rebuilt by using credit responsibly (see #10).
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Checking your credit score regularly is a good idea and will help detect errors, monitor improvements, and identify fraud. This is a “soft” enquiry and will not affect your score.
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To increase your credit score: make payments on time, pay the full amount owing, use 35% or less of your available credit, hold a variety of credit types, apply for new credit sparingly.
If this list piqued your interest and you want to learn more, why not join financial coach and credit score expert Alanna Abramsky in next week’s webinar as she tells you everything you need to know about credit scores and managing debt.
No time for a webinar? Then check out Enriched Academy Co-Founder Kevin Cochran on YouTube as he explains credit scores in just over three minutes.
Resources
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