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Three Things You Need To Know About Your Credit Score

Are you thinking about buying a new home, applying for a new job, or renting a new apartment? Before you make plans, you may want to check your credit score first. Why? A low credit score can actually affect your ability to rent an apartment, get approved for a mortgage or even get hired for a new position.

Surprised? You’re not the only one. Many Canadians are unaware of how their credit score can affect their day-to-day lives and why it’s important to check up on your credit rating from time to time. Recent survey results also show that some Canadians are not aware of how a credit score is calculated.

Knowing what your credit score is and how it works is essential to staying financially healthy. Here are three important things you should know about your credit score:

Your credit report and credit score are NOT the same

One of the most important things to understand is the difference between a credit report and a credit score. Many people assume they are the same thing, when they are actually two different pieces.

What is a credit report?

A credit report is a summary of your credit history, created the first time you borrow money. Your credit report contains information about when you opened your account, whether you make payments on time or miss payments, if you go over your credit limit and how much you owe. Some of your regular bills, including your cell phone or internet, may also be included on your credit report.

What is a credit score?

Your credit score is a three-digit number contained in your credit report. This is based on a number of factors, including making your payments on time, how close you are to your credit limit, the length of your credit history, applying for new loans or credit cards and the types of credit you use.

In Canada, your credit score can range from 300 to 900. Businesses and lenders can use this number to determine whether to lend you money (including a car loan or mortgage), hire you or rent a property to you.

For more information about your credit report and credit score, check out this great guide from the Financial Consumer Agency of Canada (FCAC).

Identity theft can wreak havoc on your score

Although your actions, like missing a payment, can affect your credit score, your score could also be affected by others, sometimes without you even knowing. That’s why it’s a good idea to check your credit score from time to time. Look for common signs of identity theft like accounts you didn’t open. If things don’t quite add up, you can dispute the information on your credit report and get it fixed with the credit reporting agencies.

You can improve your credit score

If you’ve had trouble with credit and debt in the past, or you need to build your credit score from scratch, it is possible to improve your credit score—although it does take time.  Avoiding late or missed payments, using different types of credit and paying down your debt are all great ways to improve your credit score. For more great tips on rebuilding your credit, check out personal finance blogger Bridget Casey’s post 5 Easy Steps To Build Good Credit.

Do you have a plan to repair your credit score? Join the conversation and share your tips and tricks with BDO Brampton on social media. #DebtSolutions

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