Do you know why your credit score is so important?

Do you know why your credit score is so important?

What is a credit score and why should I check it?

A credit score is a fluctuating three-digit number from 300 to 900 that reflects your personal financial situation at any given moment. The higher your score, the better.

As the term “credit score” might imply, this number represents your “creditworthiness.” Credit is simply borrowed money or loans. Your creditworthiness then marks your ability to repay loans from banks and lenders and the risk they would take on to lend you money.

As you can see from the image, here’s how the credit score rating system works:

– 300 to 629: Bad
– 630 to 689: Fair
– 690 to 719: Good
– 720 to 900: Excellent

In Canada, the two main credit bureaus are TransUnion and Equifax. According to TransUnion, the average credit score in Canada is 650, which is considered a “fair” credit score. However, 20 percent of Canadians have a bad credit score of 600 or less.

What is a credit score and why should I check it?

A credit score is a fluctuating three-digit number from 300 to 900 that reflects your personal financial situation at any given moment. The higher your score, the better.

As the term “credit score” might imply, this number represents your “creditworthiness.” Credit is simply borrowed money or loans. Your creditworthiness then marks your ability to repay loans from banks and lenders and the risk they would take on to lend you money.

As you can see from the image, here’s how the credit score rating system works:

– 300 to 629: Bad
– 630 to 689: Fair
– 690 to 719: Good
– 720 to 900: Excellent

In Canada, the two main credit bureaus are TransUnion and Equifax. According to TransUnion, the average credit score in Canada is 650, which is considered a “fair” credit score. However, 20 percent of Canadians have a bad credit score of 600 or less.

How is your credit score calculated?

Several factors impact your credit score at any given time, including:

– Your payment history: Have you ever missed payments or paid bills and credit cards late?

– Your personal debt: How much debt do you owe and across how many different accounts, types of loans, and credit cards?

– Your credit history: How long have you been building and using credit and managing your money wisely?

– Your range of credit types: How many types of credit, accounts, types of loans (mortgages, student, line of credit, etc.) do you manage?

– Your credit inquiries: How many times have you checked your credit and opened new accounts?

Based on the credit bureau calculating your credit score, all of these factors have different weights and effects on your score. If you miss credit card payments and have outstanding debt across several accounts, for example, your credit score will be negatively impacted. The same goes if you ignore bills and have maxed-out credit cards.

How is your credit score calculated?

Several factors impact your credit score at any given time, including:

– Your payment history: Have you ever missed payments or paid bills and credit cards late?

– Your personal debt: How much debt do you owe and across how many different accounts, types of loans, and credit cards?

– Your credit history: How long have you been building and using credit and managing your money wisely?

– Your range of credit types: How many types of credit, accounts, types of loans (mortgages, student, line of credit, etc.) do you manage?

– Your credit inquiries: How many times have you checked your credit and opened new accounts?

Based on the credit bureau calculating your credit score, all of these factors have different weights and effects on your score. If you miss credit card payments and have outstanding debt across several accounts, for example, your credit score will be negatively impacted. The same goes if you ignore bills and have maxed-out credit cards.

What are the effects of bad credit?

If you have bad credit, lenders may not lend you money. Or, they may lend you some of the loan, but at a crippling interest rate that may make paying off the loan impossible and/or lengthy. This may negatively impact your credit further, keeping you in a debt cycle that’s hard to get out of.

A few examples of potential loans are:

– New credit card
– Student loan
– Line of credit
– Mortgage for a home
– Personal loan
– Emergency or healthcare-related loan
– Debt consolidation loan
– Car loan
– Business loan

Perhaps worse still, landlords and potential employers have access to your credit score too. This means that a bad credit score could work against you and your ability to make more income, advance your career, or even rent an apartment.

Put your best score forward

Studies show that 79% of all credit data contains errors, which could be working against you. Some errors and omissions include duplicate accounts, inaccurate balances and line items, and unrecorded payments. Our software helps illuminate errors quickly to ensure that lenders, banks and employers see your actual credit report—and you get the best results and rates.

Want to learn more about credit? Head to our blog!

Score-Up Blog

Want to learn more about credit? Head to our blog!

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on your credit score?

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Ready to make a positive impact on your credit score?

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