Financial Friday #126: 10 "Must Know" Credit Score Facts in Under 2 minutes
1. There are two credit-reporting agencies in Canada: Equifax and TransUnion. Your credit score may vary between the two. Lenders may check one or both agencies when you apply for credit.
2. Your credit score is actually derived from the data in your credit report — which can be had for free once per year from Equifax and TransUnion. Some banks, credit unions, and other financial services companies provide your credit score for free as part of their services.
3. Credit scores range between 300 and 900 with the Canadian average being 650.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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).
9. 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.
10. 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.
Resources:
| What the latest Bank of Canada interest rate hike means Prime rate? Bank of Canada rate? Learn who controls interest rates and what the latest 0.75% increase on Sept. 7 means for your finances. Non-mortgage debt spikes 8% as inflation and higher prices bite Car loans, lines of credit, and credit card debt are all part of "non-mortgage debt" and the average Canadian now owes more than $21,000 on these types of loans. How to ride out high interest rates, inflation and a recession Today's so-called baby-boomer generation endured 17% mortgage rates and double digit inflation in the early 1980's — how did they do it?. And watch this newsletter for an upcoming webinar on how to fight inflation. How many Canadians are falling behind on their home payments? The short answer is 4%, but this article also has some good advice on what to do if you find yourself taking on more and more debt. BOC signals more interest rates hikes may be on the way In a post-rate-hike speech, BOC officials did not rule out further 2022 increases in excess of 0.25%... better mark Oct. 26 and Dec. 7 on your calendar as those are the dates for the next two interest rate announcements. |