How’s Your Credit Score?

According to a survey done for BMO, 56 percent of Canadians say they have never checked their credit score and only 14 percent check at least once a year.

52 percent do not know what would be considered a good credit score.

What is a credit report?

Your credit history is recorded in files maintained by at least one of Canada’s major credit reporting agencies – Equifax and TransUnion. Lenders send information about your accounts to them. A credit report also includes personal information that is available in public records, such as a bankruptcy and any collections.

Related: Credit report scoring

A credit report is a “snapshot” of the summary of your credit and payment history at a specific point in time. If you have ever used a credit card, taken out a personal loan, or used a “buy now, pay later” offer you have a history. It is one of the main tools lenders use to decide whether or not to give you credit.

How is the credit score determined?

The credit reporting agencies, and also lenders, produce credit scores under different brand names such as the familiar FICO, Beacon (used by most lenders) and Empirica. The numbers may differ slightly because they may not have exactly the same credit information, nor do they use the exact same software to calculate the scores. Your score will also change over time as your lenders update your credit report.

The score indicates the risk you represent to lenders – the higher your score, the lower the risk.

Related: What does your credit score really mean?

In Canada, credit scores are on a scale from 300 to 900. A good score is in the range of 680 – 720. Anything over 750 is considered excellent.

Lenders can also use your score to set the interest rate you will pay.

Check your credit report

Request a free copy of your report (minus the credit score) from both credit-reporting agencies, Equifax Canada and TransUnion Canada. You can receive your credit score online for a fee.

If you don’t want to pay, here’s a credit score estimator.

Be careful not to sign up accidentally for an ongoing report, which will charge you monthly for automatic updates.

How to improve your credit score

Do you think your credit score is not as high as it should be? Read the report carefully to see which factors are likely to have a negative effect on your score, then work to improve them:

  • Always pay your bills on time. In fact, pay a few days ahead of the due date to allow for processing. Delinquent payments, even if only a few days late, can negatively impact your score. You can set up payment reminders or sign up for automatic withdrawals (these will take the minimum payment) if you habitually forget. Keep in mind that although utilities are not recorded on your report, some cell phone companies may report late payments. Payment history accounts for approximately 35 percent of the score.
  • The best tactic is to pay your bills in full by the due date, but if you’re still working on a high balance, pay at least the required minimum. I’ve run across people who make a big lump sum payment one month and think they’re covered for the next few months. It doesn’t work that way.
  • Don’t go over your credit limit. In fact, try to keep your balance well below the limit. (50 percent is good, but try not to go over 75 percent). Amounts owing account for about 30 percent of the score.
  • Make sure you have a credit history, but don’t open a number of new credit cards too rapidly if you are a new credit user. If you consolidate your debts, some banks will make you close all your applicable credit cards. This will work against your score in the long run because length of credit history is one important factor.

Related: Why I cancelled my MBNA Smart Cash card (and how they tried to keep me)

Poor credit performance won’t haunt you forever. It will have a lower weighting as more recent good payment patterns show up. The only way to rectify a poor credit rating is to manage your credit responsibly. It takes time and there’s no quick fix.

Why do I need to check my credit report?

You may be past your main borrowing years and only use a couple of credit cards, which you pay in full monthly. Why would you need to see your credit report?

The main reason to check your report is to make sure the information is correct and, above all, yours. Your name, address and credit card number is in a lot of databases. Last year, Home Depot had a data breach of their credit card information. As a result they offered customers access to free credit monitoring with Equifax for a period of time. They are certainly not the only company that has been breached lately.

Be pro-active and check the information yourself.

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  1. Barry @ Moneywehave on June 3, 2015 at 8:20 am

    I recently ordered a free credit report just to make sure there was nothing weird on any of my accounts. I should probably pay to find out what my actual score is since I do like to churn credit cards.

  2. Brian So on June 3, 2015 at 11:24 pm

    Opening too many credit cards is probably one thing I should stop doing to improve my credit score. Although I’m not a new credit user, it probably still negatively affects my score. Some of the promotions they have are just too tempting though, like 5% cashback on gas and groceries.

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