Why Your Credit Score Is Important
Why Your Credit Score Is Important
If you're applying for a mortgage, your credit affects your interest rate which directly impacts your monthly mortgage payment. Poor credit could mean a higher mortgage payment, or result in having your mortgage application turned down. Your credit score is a number calculated from the information in your credit report. It shows the risk you represent to a lender compared to other consumers. Knowing your credit score before an important purchase, like your new dream cottage, may help you to negotiate lower interest rates.
Here are some tips, from the Financial Consumer Agency of Canada ( FCAC )*, on how to improve your credit score.
Improving Your Credit Score
If your credit score is not as high as you think it should be, make sure that the information in your credit report is correct. If it is correct, read your report carefully to find out which factors are most likely having a negative influence on your score, and then work to improve them.
Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
Try to pay your bills in full by the due date. If you aren't able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
Try to pay your debts as quickly as possible.
Don't go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score.
Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card.
(Tip: Don't skip a payment even if a bill is in dispute).
How To Get A Free Credit Report - Tips From The Government Of Canada**
Order a copy of your credit report from both Equifax Canada and TransUnion Canada. Each credit bureau may have different information about how you have used credit in the past. Ordering your own credit report has no effect on your credit score.
Equifax Canada refers to your credit report as “credit file disclosure”.
TransUnion Canada refers to your credit report as “consumer disclosure”.
(You can order your credit report online, by mail, phone or fax, phone).
Some companies will offer to provide your credit score for free. Others will request that you sign up for a paid service to see your score.
Always check if a website is secured before providing any of your personal information. A secured website will start with “https” instead of “http”.
How Often Should You Check Your Credit Report
Consider requesting your report from one bureau, then wait six months before you order from the other bureau. By spacing out your requests, you may be able to detect problems sooner.
*https://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02178.html, ** https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/order-credit-report.html#toc2
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