Why should you know your credit score?
A credit score is basically an evaluation of your creditworthiness or the level of risk you would pose to lenders. It’s calculated based on your credit report—a file that keeps track of your assets, payments and credit habits—prepared by a credit bureau. The two main credit bureaus in Canada are Equifax and TransUnion, but a lender could run their own credit check before deciding to loan you money.
What is a good credit score?
Good credit scores are loosely defined in Canada, but the commonly acceptable score is 650 or above. However, to get the best credit products and lowest rates in the marketplace, you need to have a credit score that is 700 or above; anything below 600 would be considered risky for lenders.
Why do you need to know your credit score?
There comes a time in everyone’s life when they need some credit. Your credit score affects how much credit you can get and at what rates. Whether it’s a credit card, line of credit, mortgage or financing for a new car, if you’re looking for good products with low interest rates, it’s important to know and maintain a great credit score. If you don’t meet the minimum lending criteria, you may be rejected by the big banks and lenders. You could still go to a subprime lender or private lender; however, that may increase your cost of borrowing over time. If you know your credit score, you can go from there.
Building good credit doesn’t happen overnight, so it’s important to develop good credit habits over time. Paying bills on time, making (at least) the minimum payments, not missing any payments and not taking on too much debt will go a long way to building your credit. It’s also a good idea to monitor your credit report for unusual activity, so you can catch any errors or fraud that may occur.
Do you have any questions about credit scores? Ask us in the comments section!