Do you know what is your credit score? Are you sure there are no inaccuracies in your credit report? If the answer is a No or Maybe then you should definitely check your credit score and it should be part of long-term financial planning.
Your credit report is a summary of your credit history. Your credit score is a three-digit number that comes from the information in your credit report. It shows how well you manage credit and how risky it would be for a lender to lend you money. It’s impossible to know exactly how much your credit score will change based on the actions you take. Credit bureaus and lenders don’t share the actual formulas they use to calculate credit scores.
Factors that may affect your credit score include:
- how long you’ve had credit
- how long each credit has been in your report
- if you carry a balance on your credit cards
- if you regularly miss payments
- the number of your outstanding debts
- being close to, at or above your credit limit
- the number of recent credit applications
- the type of credit you’re using
- if your debts have been sent to a collection agency
- any record of insolvency or bankruptcy
Every 12 months, Canadians can request one free copy of their credit report from Equifax and TransUnion. You should check both because each provides different information about accounts.
- When someone checks their own score, it’s considered a “soft” check. This does not affect their score.
- When a lender or credit company checks the score, it’s considered a “hard” check because it alerts the credit bureau that the person is preparing to accumulate some type of debt. This could affect the credit score.
Everyone should check their credit scores regularly and correct any errors. If there are any discrepancies noted on the bureau, have it corrected as soon as possible as it can take up to two weeks for it to properly reflect on bureaus.
