What’s your credit score?

As a student, you’re used to being graded; your report card gives you a snapshot of how well you’ve done at school. Well, from the time you get your first credit card, you’re being graded on your ability to manage money. That grade is called your credit score. It may not matter to you too much right now, but it will matter in the future, when you’re applying for a car loan or a mortgage.

The good news: bolstering your credit score isn’t rocket science. Here’s how to do it: 1. You can build your credit rating simply by opening a credit card account and consistently making your payments (preferably in full) before the due date. 2. You get lower grades for missing bill

payments. 3. There are two main credit bureaus in Canada: Equifax Canada and TransUnion Canada. You can get a copy of your credit report from either credit bureau for free.

Your credit score shows how well you manage credit (pay back your debts). Credit scores range from 300 to 900 and the higher your score is, the better. A high score indicates you are a good (low) risk. Most lenders consider a score of 600 or less an indicator that you are a high risk and they may not be willing to loan you funds—for instance, you may not be able to get a credit card or a line of credit from your bank. You get points for paying your debts in full and on time and you lose points for paying only part of your debt or making late payments and especially for missing a payment.

How is your score calculated?

It’s not possible to know exactly how many points your score will go up or down based on the actions you take. Credit bureaus and lenders don’t share the actual formulas they use to calculate credit scores, but some factors that may affect your credit score include:

• How long you’ve had credit – usually, the

longer the better. • Whether you carry a balance on your credit

cards – it’s better to carry no balance. • Whether you regularly miss payments – yikes.

Don’t miss any payments. • The amount of your outstanding debts – the more money you owe, the worse your score may be. • Whether your debts have been sent to a collection agency (an indication you are in financial trouble).