Credit Scores

Your credit score is a representation of your creditworthiness, based on your financial history. When a bank wants to know whether they should lend you money (and how much they should charge you in interest rates), they look at your credit score to determine how risky it would be to lend you money. The riskier you look, the less you can borrow, and the more interest you pay on the money they lend you.

It isn’t just banks, either. People like your landlord and your cellphone provider can look at your credit score to determine the services that they will offer to you. Having a good credit score will make your life easier and cheaper in all sorts of ways. Regularly checking your credit report can also alert you to signs of fraud, like credit cards or payday loans in your name that you didn’t apply for.

Accessing and Understanding Your Credit Score

To order your credit report and score, contact one of the credit reporting agencies operating in Canada. There are two main reporting agencies, TransUnion and Equifax. You can order your credit report and score online, by telephone, mail, or fax, or in person. Note that, if you want to access your credit report online or if you want to see your credit score, you’ll need to pay, with online access being the most expensive. In Canada, you’re also entitled to unlimited free credit reports, so long as you apply in writing for a printed copy to be mailed to you. Forms are available on the TransUnion and Equifax websites. Note that these free reports will not include your credit score, just your written credit report. 

If you paid for your credit score and report, you’ll be able to see your numerical credit score. This is a number between 300 and 900, where 900 is the best possible score. The average Canadian has a credit score in the mid-700s. Your credit report will contain information about your borrowing history, including things like whether you pay your bills on time and how much you owe. This is the real meat of the report. Financial institutions will look at this far more closely than your numerical credit score, because it tells them more about what they can expect. It’s also a great way of finding out where you can improve, because even without your credit score, you’ll be able to read your report and pick out the sections that would make people worry about lending money to you. The Financial Consumer Agency of Canada provides a very informative guide to understanding your credit report.

Improve Your Credit Score

Improving your credit score isn’t necessarily easy, but it is simple. The faster you pay your debts, the better your credit score will be. Late payments, or payments of less money than required, will severely damage your credit, especially if any debts go to collections. Try to pay all bills in full before their due date. If that isn’t possible, pay at least the minimum required before the due date. Utility bills might not be included in your credit report, but those companies can still report late payments to reporting agencies. Credit cards also have a big impact on your credit score. Make sure that you never exceed your credit limit, and if possible, don’t even get close to it. For more individualized solutions, read your credit report, and review it regularly to see if your solutions are working and watch your score improve. 

The other way to improve your credit scores is to dispute negative information. You can do this by contacting credit reporting agencies, and corrections won’t cost you anything. Look carefully for any signs of fraudulent activity: fraudsters don’t care about your credit rating, and their bad debts can ruin it. Confirm any reported late payments against your own financial records to see if they were actually late, and look for any negative reports that are still on your credit report after their legal time limit. There may not be errors on your credit report, but if there are, fixing them is the quickest way to improve your credit score.