Your Credit Score

Managing your finances becomes simpler when you're not reliant on borrowing money. The usual routine involves earning income, covering expenses, setting aside savings, and having discretionary funds. However, some significant purchases, like homes or cars, often necessitate borrowing. Being mindful of factors that enhance your credit score is crucial, as this metric heavily influences lenders' decisions regarding loan approvals.

What is your credit score?

Credit reports and scores encompass the factors shaping your creditworthiness. These factors span credit types, credit utilization, and payment history. The credit score, a numerical representation of this data, gauges your reliability as a borrower. 

Credit agencies maintain vast databases, tracking repayment behaviors for various debts, from credit cards to loans. Your recent financial conduct is compared to this database, generating a probability score indicating your likelihood of making timely payments. Higher scores signify better creditworthiness. Equifax Canada notes that credit scores typically range from 400 to 900, with a good score at 600 or higher and 750 or more considered excellent. A strong score not only facilitates loan approvals but also grants financial flexibility, offering higher credit limits and potentially lower interest rates. 

Check your current credit score.

Equifax Canada allows access to your credit score online for $24, requiring your SIN and contact details. A verification process precedes the instant report download. Opting out of information sharing with non-affiliated third parties is advisable to avoid unsolicited calls from debt management firms. 

Securing a credit card from your primary bank, distinct from a debit card, aids in establishing a credit history, leveraging your banking relationship for card approval. Setting a maximum credit limit is prudent initially, instilling discipline to prevent overuse. Prompt payment of incurred debts, especially credit card dues, is advisable due to their high interest rates. 

Improving your credit rating. 

Beyond credit cards, maintaining a positive payment history on loans or lines of credit contributes to bolstering your credit score. Timely payment of bills, such as utilities or phone bills, also positively influences credit ratings. Equifax warns against seeking numerous loans simultaneously. A diverse debt profile and consistent, punctual payments require time to solidify, much like building a favorable credit score.