Do you know your credit score? Many Canadians are still in the dark when it comes to the importance of monitoring their credit score. With Canada’s household debt at record levels, we think there’s a really important opportunity to educate Canadians about credit and help them better manage their finances.
In fact, a recent study conducted by Borrowell found a positive relationship between frequency of credit monitoring and credit score increase over time.
Here’s why having a good credit score is important:
Having a good credit score is important for many reasons – but mainly because of how much your credit score affects your overall financial well-being. Putting it simply, having a good credit score just makes life easier! It can help you:
There are two different credit bureaus in Canada that calculate credit scores: Equifax and TransUnion. A credit score is calculated by weighing various factors on a person’s credit file. Borrowell provides the ERS 2.0 credit score – a popular and legitimate score calculated by Equifax – that’s used by many banks and lenders to evaluate creditworthiness.
Credit bureaus use the following factors in credit score calculation:
While some of these factors carry more weight than others, all of the above are important to a healthy and good credit score.
Creditors look at the amount of credit you have available and the amount you have used. Keeping the balance on your card low looks good on your credit report and to anyone checking your credit.
Try to keep your credit utilization below 30%. This means if you have a credit card with a limit of $3,000, then you should keep the balance below $1,000.
Bonus tip: raising your credit limit (while may seem counterintuitive) can help you keep utilization low since you’re increasing your available credit, creating a more favourable ratio.
Paying your bills on time – every time – is one of the best things you can do to improve your credit score. This shows any potential lender that you ’re financially responsible. Creditors have different grace periods, so it’s important to make sure you pay all bills by their due date.
Delinquent accounts can have a negative impact on your credit score. If you have any past due accounts, try to pay off the oldest ones first.
Bonus tip: add your household bill due dates to your calendar on your phone so you can’t miss them.
According to Equifax, the average Canadian has about $22,837 of debt, with much of it being carried on credit cards at a whopping 19.9% interest rate! You can prevent your account from being charged this interest if you pay it off each month, which will save you money.
Unexpected events can happen, and you might not be able to pay your credit card bill in full each month. However, whenever possible you should try to pay it off as quickly as you can.
Bonus tip: products like low-interest balance credit cards and low-interest personal loans can save you money and help get you out of debt faster.
Your credit score should be thought of as a general indicator of your overall financial health. Knowing and understanding your score is a great way to take control of your finances so you can plan for the future.
About Borrowell:
Borrowell helps Canadians make great decisions about credit. With its free credit score and report monitoring, personal loans, and product recommendations, Borrowell empowers Canadians to improve their financial well-being and be the hero of their credit! Join the over 500,000 Canadians who have checked their free credit score with Borrowell.
Updated on July 3rd, 2019
Sometimes unexcpected expenses can leave you with bad credit, but the good news is even with poor credit you can still qualify for a mortgage.
Sometimes unexcpected expenses can leave you with bad credit, but the good news is even with poor credit you can still qualify for a mortgage.
The Manulife One Mortgage is an all-in-one tool combining your mortgage, savings, and income into one easy-to-use account. Find out if it's right for you.