There are several numbers that will be assigned to you throughout your life as a form of identification or to map you against others on a scale of ‘good’ and ‘bad’. As soon as you’re born you’ll get a number on our birth certificate, then there’s the passport number, drivers license, social insurance and health card. In university there’s your GPA; when you join the workforce you typically get an employee ID number. But of all these numbers, there’s one that looms in the background and only rears its head when it’s got something bad to say. Your credit score.
This little number has a significant amount of influence over us when it comes to matters of personal finance. It’s what will determine if you get approved for a credit card or not, if you qualify for a line of credit, or if you can get a mortgage or any other type of loan.
Your credit score is a number, on a scale of 300 to 900, that will tell lenders just how likely you are to repay a loan. The higher the number the better the chances are that you won’t default on the loan. Lenders like applicants with high credit scores, a good score is 760 or higher.
This number is derived from your credit history, so throughout your life, if you ever forgot to pay the minimum amount owing on your Visa or if you’ve racked up several store cards over the years, you can be sure the Credit Gods (also referred as the Credit Bureau) were watching and keeping a tally.
- Your credit score can be affected by:
- The length of your credit history
- Bill and loan payment history
- Current outstanding debt
- Credit used versus available credit
- Severity of any credit defaults
Below are a few tips on how to make sure your credit score number is where you want it to be.
Credit Score Top Tips
1. Know your number. First things first, you need to know what your credit score is and if it’s not pretty, what’s causing the problem. You can get a free report from Equifax.ca or Transunion.ca that will include your credit history and current credit outstanding. For a small fee, they will include your credit score as well.
Your credit score can determine what mortgage rate you get when you’re looking for a mortgage as lenders typically reservetheir best deals for those with good credit. So it’s helpful to know your score before you start your mortgage shopping.
2. Check your number regularly. You should check your credit score on a yearly basis. That way you can flag up any mistakes or credit fraud before it goes on for too long. Their are credit monitoring services available for around $25/month that help keep an eye on things for you. The Credit Gods are not perfect, so if a mistake happens it’s your responsibility to fix it.
3. Pay before it’s due. Always pay the balance or the interest owing a few days before it is due. That way, if the due date falls on a Sunday or holiday, you don’t have to worry about the payment clearing late and this appearing on your credit history.
4. Keep your debt in check. A good rule of thumb is to keep your debt levels below 50% of the amount of credit available. If you’re over this ratio, consider taking out another card. And make sure you never go over your credit limit (the Credit Gods really don’t like that).
5. Limit your number of credit score requests. If you end up applying for a few different credit cards in a short period of time (the sign-up discounts offered on store cards can be enticing), or if you’re searching for a mortgage and trying to get pre-approved by a few different lenders, the Credit Gods will start to think that you’re in financial trouble and your number is likely to drop.
6. Time can heal all scores. If you’re starting off with a low number, just remember that as time goes on (if you pay your bills on time and use a wise amount of debt), the Credit Gods will eventually forgive you and your good credit behavior will be rewarded with a higher number. Be prepared that it just might take a few years.
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