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Getting credit worthy - how to get your score up




There’s a plethora of scores and ratings in your life; and more today than ever. Some for restaurants, hotels or your child’s grades. But none are as impactful on your financial life and elusive, as your credit score.

If you don’t know your score and have never checked your report, you’re not alone. Most Canadians haven’t either.      

So, what’s the difference between your score and your report?
Julie Kuzmic, Senior Product Manager with Equifax Canada Co explains that “your credit score is a number between 300 and 900 which is calculated using the information in your credit file. The higher the score, the more likely you are to pay your bills on time. Your score is not actually one of the pieces of data on your credit file. Rather, it is calculated when needed. Since no one can access your credit file without your permission, your authorization is required any time an organization wants to have your score calculated.”

What’s on your credit report?
If you’ve ever applied for or received credit (a cell phone, credit card, loan, mortgage or more) in Canada, you have a credit file with both Equifax Canada and TransUnion Canada.  They are the two reporting agencies in our country.  You can request a free credit report (won’t include your score) as often as you’d like via mail, or, for a fee with both, you can go online to get your report and or score.

How important is your score?
Shannon Lee Simmons, Certified Financial Planner and author of Worry-Free Money: The guilt-free approach to managing your money and your life says, “knowing your credit score is really important when it comes to your overall financial health. It's good to check in on your score to make sure that it's in good shape. You need a good credit score to qualify for a mortgage or potentially to show a future landlord. Checking in on your credit score will confirm that things are on track, that you know where you stand with any creditors and motivate you to keep making all your payments on time and not max your cards out.”

How do I get a high credit score?
Let’s weight back in with Julie on this.  She says that, “first, it’s important to remember many lenders consider a score around 660 or higher to be good. Scores approaching 760 or higher are generally considered to be excellent. Lenders tend to view scores in ranges, so two people with scores 825 and 795 would typically both be viewed as “excellent”. From a credit score perspective, these two individuals usually wouldn’t be viewed any differently.”

For people who are building (or rebuilding) credit, Julie tells me that there’s no quick fix. “Although previous bankruptcies, items in collections and late payments can all be negative factors in a score calculation, time is a factor as well. As these items move further into the past and the individual continues to pay their bills on time, the overall impact of these negative factors on the score should decrease.”

A few behaviours which will go a long way towards achieving and maintaining a good score are:
-Making payments on time
-Keeping credit balances in check
-Avoiding applying for new credit unless you have a genuine need for a new account
 
Julie’s bottom line?  “Making payments on time is what lenders want to see and that behaviour over time will have a positive effect on a credit score.” You can find more information on how credit scores are calculated here


Speak to a Meridian Financial Advisor to discuss your financial plan today.

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