Financial Friday #84: What has your credit score done for you lately?
If you are trying to get your financial life in order, one of the key metrics to measure your progress is your credit score. Your credit score is a measure of your demonstrated ability to pay your loan commitments and other bills in a timely manner. It is derived from a credit report issued by either TransUnion or Equifax and ranges between 300 and 900. The higher your score, the more likely a lender is to loan you money.
However, these days a credit score is used for a lot more than loan decisions and ensuring you have the highest score possible is going to open doors for many opportunities and save you money. Here are the top 5 reasons why you should be monitoring your credit score on a regular basis.
1. The most obvious reason is that a higher score will allow you to borrow more money and do so at a lower cost (interest rate). If you want to get one of those super-low advertised mortgage rates you are going to need a top-notch credit score. The potential savings are huge on big ticket items; qualifying for a preferential rate on your mortgage due to a good credit score can easily save you tens of thousands of dollars by the time you pay off your house. Vehicle loans are another area where a good credit score can let you keep a lot more money in your jeans every month.
2. Credit scores are also used by insurance companies and a score of over 800 can get you a substantial discount (30%+) on your homeowners insurance.
3. Many employers will also request a background check and a credit check before they will formally offer employment. It is legal in Canada to make this request and it is often a requirement for jobs in government, finance, and many other industries.
4. Landlords will often ask for a credit check before offering you a lease; even utility providers may review your credit history to decide whether or not you need to pay a security deposit to connect to their services.
5. If you have your eye on the perks that go with obtaining one of those premium credit cards or are looking to increase the limit on your credit card, obtain a business loan, or secure a personal line of credit, your credit score is going to be a big factor in whether or not you are successful.
It isn’t just for borrowing money where your credit score comes into play, so you should know what your score is and monitor it regularly. There are things you can do to increase your score and checking it every few months is also a good way to ensure that you have not been the victim of fraud or identity theft.
If you want to know all about your credit score… where it comes from, how to check it, what the number means, what affects your score, how to increase it... you should definitely check out this webinar next week. Alanna Abramsky, our head of financial coaching and resident credit score expert will be packing everything you need to know into an easy-to-understand, informative session.
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