Do you know your credit score?
Mogo’s credit score expert, Chantel Chapman, explains this important number — and why you need to know yours
M
Mogo’s credit score expert, Chantel Chapman, explains this important number — and why you need to know yours.
Report cards and grades don’t stop when school is over. There is another report card that
follows you around for the rest of your life, called the credit bureau report — which also has a grade called the credit score. Starting this week and continuing in an ongoing series, we will be teaching you everything you need to know about credit scores. What is a credit bureau? A credit bureau is used to report on the history of your interactions with credit. The credit score is the grade of that history. There are two credit bureau companies in Canada: Equifax and TransUnion. Lenders or credit collection agencies send ongoing updates on your history with them to the credit bureau agency. Your credit bureau shows your history of borrowing and details on any loans you’ve taken out, as well as other information like how many times you get your credit checked and how close you are to maxing out the balance on your credit cards or lines of credit.
For example, if you’ve been avoiding those parking
tickets or your phone bill from 2012, those can get written up in your report, too. What is a credit
score? Your credit score is calculated based on secret algorithms using all the above — and more. It can be a measure of risk for lenders who are considering offering you credit — or sometimes even for employers, to see how responsible you are. Generally, they look at your credit score to judge whether you’d be prone to doing things like not paying your bills on time and maxing out your credit cards.
However, not using credit could also lower your score as you’re not showing that you’re capable of managing credit like a responsible adult should.
Credit scores range from 300 to 900. The higher, the better. In fact, 57% of Canadians have a credit score over 760. Who uses your credit score? Your credit score is a great indicator of your financial health and your organizational skills, so it used in many different situations to determine your eligibility for things like getting a mortgage or even renting a property. Here is a list of who else looks at your credit score:
Lenders and financial institutions Lenders and financial institutions rely on a credit score and report to determine if you’re credit-worthy. If you’re doing one of the following and need to borrow money to do it, your credit score is likely going to be involved: • Buying (or renting) a home • Buying a car • Borrowing to go on a trip • Financing a new MacBook Air
Generally, a low score could mean getting declined or getting charged higher interest rates, while a high score opens the door to lower interest rates and better deals when borrowing money or getting a mortgage.
Landlords Landlords are using credit scores more and more, so if your score is low you might not get approved to rent the apartment you’ve been eyeing. Not great.
Employers In the United States, 47% of employers run credit checks when they’re looking at hiring you — and if you think that has nothing to do with you, it’s becoming more and more common in Canada as well. The business world When you get a smallbusiness loan for a business that’s new, with no established credit history,
the lender might want to see your personal credit to determine worthiness.
Your partner? The Federal Reserve reported that having a higher credit score is correlated with being more likely to stay in a committed relationship. In a new relationship, every 100 points that your credit or partner’s credit score improves will increase your chances of staying together for another year by 30%. I did a survey with Mogo on credit scores and the results said that 67% of people would choose a partner with a good credit score over good looks! Where Can You Get
Your Credit Score? Knowing your credit score is key to maintaining your finances and making sure that you are always getting the best rates that you possibly can when you’re looking for credit or that you are not missing out on the job or apartment you want because your score was not good enough. Historically, Canadians have had to pay to find out their credit scores and check their financial health. Not any longer. Now you can get your Equifax credit score with monthly updates for free at Mogo.
The first step to a great score is knowing where you stand today.