Everyone who’s ever borrowed money to buy a car or a house or applied for a credit card or any other personal loan has a credit file.

Because we love to borrow money, that means almost every adult Canadian has a credit file. More than 21 million of us have credit reports. And most of us have no idea what’s in them.

Are there mistakes? Have you been denied credit and don’t know why? Is someone trying to steal your identity? A simple check of your credit report will probably answer all those questions. And it’s free for the asking.

So what’s in a credit report?

You may be surprised by the amount of personal financial data in your credit report. It contains information about every loan you’ve taken out in the last six years — whether you regularly pay on time, how much you owe, what your credit limit is on each account and a list of authorized credit grantors who have accessed your file.

Each of the accounts includes a notation that includes a letter and a number. The letter “R” refers to a revolving debt, while the letter “I” stands for an instalment account. The numbers go from 0 (too new to rate) to 9 (bad debt or placed for collection or bankruptcy.) For a revolving account, an R1 rating is the notation to have. That means you pay your bills within 30 days, or “as agreed.”

Any company that’s thinking of granting you credit or providing you with a service that involves you receiving something before you pay for it (like phone service or a rental apartment) can get a copy of your credit report. Needless to say, they want to see lots of “Paid as agreed” notations in your file. And your credit report has a long history. Credit information (good and bad) remains on file for at least six years.

What’s a credit score? And why is it so important?

A credit rating or score (also called a Beacon or a FICO score) is not part of a regular credit report. Basically, it’s a mathematical formula that translates the data in the credit report into a three-digit number that lenders use to make credit decisions. 

The numbers go from 300 to 900. The higher the number, the better. For example, a number of 750 to 799 is shared by 27 per cent of the population. Statistics show that only two per cent of the borrowers in this category will default on a loan or go bankrupt in the next two years. That means that anyone with this score is very likely to get that loan or mortgage they’ve applied for.

What are the cutoff points? TransUnion says someone with a credit score below 650 may have trouble receiving new credit. Some mortgage lenders will want to see a minimum score of 680 to get the best interest rate.    

The exact formula bureaus use to calculate credit scores is secret. Paying bills on time is clearly the key factor. But because lenders don’t make any money off you if you pay your bills in full each month, people who carry a balance month-to-month (but who pay their minimum monthly balances on time) can be given a higher score than people who pay their amount due in full. 

This isn’t too surprising when you realize that credit bureaus are primarily funded by banks, lenders, and businesses, not by consumers.

How can I get a copy of my credit report and credit score?

You can ask for a free copy of your credit file by mail. There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus.

Complete details on how to order credit reports are available online. Basically, you have to send in photocopies of two pieces of identification, along with some basic background information. The reports will come back in two to three weeks.

The “free-report-by-mail” links are not prominently displayed — the credit bureaus are anxious to sell you instant access to your report and credit score online.

For TransUnion, the instructions to get a free credit report by mail are available here. For Equifax, the instructions are here. 

If you can’t wait for a free report by mail, you can always get an instant credit report online. TransUnion charges $14.95. Equifax’s rate is $15.50.

To get your all-important credit score, you’ll have to spend a bit more. Both Equifax and TransUnion offer consumers real-time online access to their credit score (your credit report is also included). Equifax charges $23.95, while TransUnion’s fee is $22.90. There is no free service to access your credit score.

You can always try asking the lender you’re trying to do business with, but they’re not supposed to give credit score information to you. 

You know your credit score is important, but what exactly does that three-digit number mean when it comes to securing a car loan? In this post, we’ll explain what your credit score means and how it’s calculated.

How do credit scores work in Canada?

In Canada, credit scores range from 900 points (the highest score) down to 300 points. According to TransUnion, a score above 650 will likely qualify you for a standard loan, while a score under 650 will likely bring difficulty in receiving new credit.

What is a good credit score in Canada?

A credit score of 680 or above is generally considered good. 780 or above is considered to be excellent, while 900 is perfect. Most credit scores fall between 620 and 679. Higher scores indicate better credit decisions and can make lenders more confident that you will repay your future debts as agreed.

How to check your credit report in Canada

There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You can get a free copy of your credit report by mail in two to three weeks once you have provided your identification and some basic information. Be sure to check with both bureaus.
If you need a credit report sooner you can get one online from both bureaus for a fee of less than $20. Keep in mind that your number might differ slightly between companies because of their unique algorithms.

What your credit score means

Now that you have your credit report, you need to decipher your score and figure out where you land on the creditworthiness scale. We’ll start at the top of the range and work our way down:

780+: Excellent credit. You can access the best interest rates on the market and will typically be approved for a loan.
779-720: Very good credit. Your credit is near perfect and you will enjoy very good interest rates.
719-680: Good credit. You will have little to no trouble getting approved for financing.
679-620: Average credit. The majority of borrowers fall in this range in Canada. You will have slightly higher interest rates than someone with a higher number.
619-580: Poor credit. If you land in this range, you’re what lenders deem “high risk.” You might have a hard time getting a loan and will have high interest rates.
579-500: Very poor credit. You will rarely be approved for financing,
300-500: Terrible credit. If you have a score of less than 500 you have bad credit and it will be very difficult to get approved for any kind of loan. You should work on improving your credit.
That range probably looks intimidating, especially if you fall on the low end of the scale. But, the good news is that it’s possible to improve your credit score with a little work and some good advice.

How is credit score calculated in Canada?

Your credit score is calculated through six main categories and is representative of how well you manage your credit responsibilities.

FACTORS AFFECTING CREDIT SCORE IN CANADA

There are six main factors that affect the calculation of your credit score. These are the areas that you should focus on if you’re interested in improving your credit score.

1. Payment History: This reflects how frequently you pay your debts or bills on time and it is the biggest thing that affects your credit score. If you want to improve your number, your main priority should be paying your bills on time.
2. Used Credit vs. Available Credit: This is the second largest contributor to your score and it refers to the amount you owe compared to your credit limit. It’s a good idea to avoid running your balance up to your limit, as that can harm your score.
3. Credit History: Because good credit is built over time, how long you’ve had credit plays a role in your score. Lenders want to know that you can handle credit accounts over a period of time.
   
4. Diversity: Lenders also want to know that your can handle a mix of different kinds of credit at once, such as credit cards, loans and mortgages. The more diverse your credit, the higher your score.
5. Public Records: If you’ve claimed bankruptcy in the past or have had prior collection issues, these will be factored into your score.
6. Inquiries: Your credit score takes a small and temporary hit each time a lender accesses your file; however, your score will drop if you apply for a bunch of new credit in a short period of time. This does not apply to pre-approvals or personal credit report requests.

How to improve your credit score

With so many different things affecting your credit score, tackling your credit situation might seem like a daunting task. The good news is that your low score doesn’t have to be looming over you forever because you have the power to improve your credit score.

There’s no secret for getting a 764 credit score. Rather, it simply requires consistency and commitment. You need to pay your bills on time, use only a portion of the credit made available to you, and generally work to make any mistakes you’ve made look like freak occurrences rather than standard practice. You also need to know exactly where you’re starting from and then actually track your progress over time to hold yourself accountable. So make sure to regularly check your latest credit score for free on as you work your way to a 764 credit score.

You can find specific recommendations for what we recommend doing in your situation on your personalized credit analysis page. And below, you can check out some of the most common steps people need to take to get a credit score of 764.

Here’s how to get a 764 credit score:

1. Always Pay Your Bills on Time: Payment history is the most important part of any credit score because it directly answers the question of whether a lender can expect to get its money back from you. Missed payments are the trademark of a risky borrower, indicating irresponsibility and potential financial distress. So it’s important to have as few as possible on your credit report and to surround any that do appear with lots of months where you pay by the due date.
2. Pay Off Your Credit Card Debt: Credit card debt is extremely costly, and we collectively owe way too much of it right now. Having a lot of debt puts pressure on your finances, making missed payments more likely. It also makes you a riskier candidate to borrow because you will have less income and fewer assets available to afford a new loan or line of credit. And that is exactly what credit scores measure.Paying off credit card debt will also reduce your credit utilization, which is a key ingredient in your credit score.
3. Take Advantage of Free Credit Monitoring: You don’t want fraud or credit report errors to derail your pursuit of a 764 credit score. And while free credit monitoring won’t prevent such things from happening, it will make sure you know about them immediately. And that will give you the chance to sort out any problems before they do much, if any, damage.On that note, you should probably review your latest credit report for anything fishy, too, just to be safe.

How to Improve Your Credit Score From 764 to 800+

A credit score of 764 is on the brink of perfection, and you probably won’t have to change much to join the 800+ credit score club. Your personalized credit analysis from here will tell you what needs improvement and exactly how to fix it.

A few things in particular tend to stand between a credit score of 764 and perfect credit, though. And if you do nothing else, make sure to take the following steps.

1. Reduce Your Credit Utilization: People with credit scores in the 800s use less than 5% of their available credit, according to VantageScore, while people with scores from 701 to 750 have 27% credit utilization. You definitely want to keep your credit utilization below 30% on all of your credit card accounts. And the lower it is, the better. There are a few ways to improve your credit utilization. You can charge less to your credit cards. You can make bigger monthly payments, if you don’t always pay in full already. You can also pay your bill multiple times per month to reduce the balance listed on your monthly statement, which is what’s used to calculate credit utilization.
2. Pay Down Debt: The average American household has roughly $8,000 in credit card debt. That type of burden can quickly become unmanageable, leading to missed payments, default, collections accounts and other types of negative information being added to your credit report. So the more debt you have relative to your income, the riskier you’ll seem to lenders. And since that’s exactly what a credit score measures, paying off amounts owed generally leads to credit score gains.
3. Avoid Hard Inquiries: Each time you apply for a loan or line of credit, there’s a “hard inquiry” on your credit report, when the lender reviews your credit history to see if you qualify. That hard inquiry can lower your credit score slightly for about six months. So if an 850 credit score is your aim, take note that applying for credit could affect your timeline.

Of course, you’ll also need to pay all your bills on time every month and otherwise manage your finances responsibly if you want to maintain your 764 credit score, let alone improve it.

No one but FICO knows precisely how its credit scoring works but it is known that your score is made up of five components.

1. Payment history – or how you’ve used credit, which makes up 35% of your score
2. Credit utilization – how much credit you’ve used vs. the amount you have available, which is 30% of your score
3. Length of credit history – or how long you’ve had credit, which is 15% of your score
4. Types of credit used – the different types of credit you’ve had such as credit cards and an auto loan, which makes up 10% of your credit score
5. Recent searches for credit – or the number of times you’ve applied for credit, which equals 10% of your credit score.

If you’re interested in learning a bit more about these five components and why you should never close a credit card.

Do the math

When you do the math, adding up your payment history and your credit utilization, you’ll get 65%. What this means is that the biggest factor in your credit score is how you’ve used credit, that is how good you’ve been about making your payments and how much of your credit you’ve used vs. the amount you have available. This is based on what’s called your debt-to-credit ratio. For example, suppose you have a total credit limit of $10,000 and have used up $3000 of it. In this case your debt-to-credit ratio would be 30%, which would be fairly acceptable. Any ratio higher than this would have a negative effect on your credit score.

The simple trick

Obviously there is very little you can do about your payment history because, after all, it is history. However, you could make a dramatic change in your debt-to-credit ratio, which might boost your credit score by as many as 30 to 40 points. There are two ways to do this. First, you could pay down some of your debt. As an example of this, suppose you had a debt-to-credit ratio of 50% because you had charged up $5000 against a total credit limit of $10,000. If you were able to pay down that $5000 to $3000, you would now have a debt-to-credit ratio of 30% and should see a nice boost in your credit score.

The second option

If there are reasons why you can’t pay down your debt, there is still a simple trick you could use to improve your debt-to-credit ratio. It’s to get your credit limits raised. This can be tough to do but if you have a good payment history with one or more of your credit card providers, you could contact them and ask for an increase in your credit limits. If you were able to get your total credit available raised to, say, $15,000 and owed the same $5,000, your debt-to-credit ratio would go down from 50% to 33%, which should produce a good jump in your credit score.

How to improve your payment history

We said earlier that there is very little you can do to change your payment history but it’s possible you could improve it. First, you would need to get your credit reports from Experian, Equifax and TransUnion. They are required by law to provide you with your credit report free once a year. You could call or write each of these companies and request your credit report or go to the site www.annualcreditreport.com and get all three simultaneously. Then second, you would need to go over your reports very carefully looking for negative items such as.

• Late payments
• Defaults
• Collection accounts
• Foreclosures
• Liens

Look for errors

It’s possible that there may be negative item on one of your credit reports that’s an error. If so, you need to immediately dispute it. The way you do this is by writing a letter to the relevant credit bureau, along with whatever documentation you have that would support your claim. You should also send a copy of your letter and documentation to the institution that provided the erroneous information. Once the credit bureau receives your letter, it is required to contact the company that provided the information and ask for it to be verified. In the event the company cannot do this or doesn’t respond within 30 days, the credit bureau must remove it from your credit report.

In most states, if the debt is yours, the amount is correct, and the debt collector is entitled to collect, the collector can continue to ask you to pay the debt. If you are sued, you may have a defense to the lawsuit due to the age of the debt.

In most states, the debt itself does not expire or disappear until you pay it. Under the Fair Credit Reporting Act, debts can appear on your credit report generally for seven years and in a few cases, longer than that.

Under state laws, if you are sued about a debt, and the debt is too old, you may have a defense to the lawsuit. These state laws are called “statutes of limitation.” Most statutes of limitations fall in the three-to-six year range, although in some jurisdictions they may extend for longer depending on the type of debt.

Statutes of limitation may vary depending on the:

• Type of debt
• State where you live
• State law named in your credit agreement.

The statute of limitations may also be affected by terms in the contract with your creditor and, if you’ve moved, by laws in the state where you are sued. You may want to consult with a lawyer to learn how this period is calculated and when the period may have started with respect to your debt.

In some states, a partial payment on an old account may restart the time period during which you can be sued. Similarly, in some states, sending a written statement acknowledging that you owe an old debt may restart the time period during which you can be sued.

If a debt collector sues over a debt that has gone unpaid for longer than the statute of limitations period, you have a defense to the lawsuit. If you are sued, and you think the statute of limitations has passed, you may want to consult an attorney. It is a violation of the Fair Debt Collection Practice Act for a debt collector to sue you or threaten to sue you if it knows the statute of limitations has passed.

The CFPB has prepared sample letters that a you could use to respond to a debt collector who is trying to collect a debt. The letters include tips on how to use them. The sample letters may help you to get information, including information about the age of the debt.  The letters may also help you set limits or stop any further communication, or exercise some of your rights. Always keep a copy of your letter for your records.

How Are Medical Collections Different?

Until recently, medical collections were treated the same as all other collections.

However, FICO updated their scoring in 2014 to treat medical collections differently. Medical collections now carry less weight when your credit score is calculated.

Again, this doesn’t mean a medical collection won’t affect your ability to get a loan. Lenders don’t just look at your credit score to make their loan decisions.

They usually pull your entire credit report and notice your past negative items. This, in turn, will affect your approval as well as the interest rate.

This is especially true when you’re applying for a mortgage loan.

Original Creditor Vs. Collection Agency

When it comes to actually collecting on a debt, generally you’ll either be contacted by the original creditor or a collection agency.

When you’re contacted by a collection agency, it’s likely an older debt that the original creditor sold to the collection agency for pennies on the dollar.

If this is the case, it could actually be good news for you because it puts you in a good position to negotiate, but we’ll go more into that in a bit.

Once a debt turns into a collection and it’s logged on your credit report, you will see a significant drop in your credit score.

If you didn’t have any prior negative items on your credit report, this drop could be north of 100 points.

How much your credit score drops largely depends on how bad it was, to begin with.

In other words, a collection will have less of an impact on those who already have bad credit.

Another thing to keep in mind is that as the collection ages, it will have less of an impact on your credit score.

Paid Collection Vs. Unpaid Collection

One mistake I see people often make is thinking that paying a collection will automatically remove it from their credit report.

It’s important to keep in mind that the collection won’t be removed from your credit report even if it’s a paid collection.

Therefore, lenders will see the collection when they pull your credit report and it will likely affect their decision to lend you money.

At the very the least your interest rate will go up. With this said, it’s definitely worth removing a collection from your credit report.

Also, when you have a collection, it’s likely that there are late payment entries on your credit report associated with the same debt.

This is simply because you were probably late on your payments which is what caused it to go to collections.

These entries are usually (not always) separate from the collection, and late payments can also be removed from your credit report.

How Long Does a Collection Stay on Your Credit Report?

Whether a collection is paid or unpaid, it will remain on your credit report for 7 years.

This means that for seven years it’s going to affect your ability to get auto loans, credit cards, mortgages —basically everything.

The worst part about it is even if you do get a loan, you’re going to end up paying a higher interest rate because you have bad credit.

Of course, as a collection ages, it will have less of an impact on your ability to get credit.

How Are Medical Collections Different?

Until recently, medical collections were treated the same as all other collections.

However, FICO updated their scoring in 2014 to treat medical collections differently. Medical collections now carry less weight when your credit score is calculated.

Again, this doesn’t mean a medical collection won’t affect your ability to get a loan. Lenders don’t just look at your credit score to make their loan decisions.

They usually pull your entire credit report and notice your past negative items. This, in turn, will affect your approval as well as the interest rate.

This is especially true when you’re applying for a mortgage loan.

How I Remove Collections From My Credit Report

When I was in college I got a cellphone with Sprint. The phone service didn’t work well so I switched to Verizon but forgot that I owed Sprint a payment.

Long story short, it ended up going to Sprint collections and showing up on my credit report. I went ahead and paid the collection because I thought that would also remove it from my credit report.

However, it wasn’t removed, it was just changed to “paid collection”. I followed these steps to get it removed.

1. Request a Goodwill Adjustment from the collection agency

The first step is to mail the collection agency a “goodwill letter”.

This is basically a letter that explains your situation, such as you want to purchase a house but can’t because of the collection on your credit report, and you’re kindly asking that they remove the collection out of goodwill.

I know this sounds like a long shot, but it works surprisingly well. The best way to write an effective goodwill letter is to use my sample goodwill letter template.

Your credit score affects your financial life in more ways than one. When you apply for a loan or credit card, lenders base approval decisions in part on your credit health. Not only that, but your credit score can also influence the interest rates you’ll pay for credit cards, car loans, mortgages and other lines of credit.

FICO® and VantageScore® are the two most common credit scores for consumers. Both range from 300 to 850, with a higher score indicating lower credit risk. Knowing where you fall on the spectrum is important, especially if your goal is to get the best rate possible on your credit accounts.

The difference between a fair credit rating and a good credit score may be just a few points but it can make a world of financial difference when it comes time to borrow. Here’s everything you need to know about the good, the bad and the excellent when it comes to credit scores.

Credit score ranges: Is 700 a good credit score?

FICO® and VantageScore® calculate credit scores, but it’s the lender who decides whether a credit score is excellent, good, fair, poor or bad. What constitutes a good or excellent score ultimately depends on where the lender sets its cutoffs.

Broadly speaking, credit score ranges can be broken down along these lines:

Range	Category
Excellent	750 to 850
Good	700 to 749
Fair	650 to 699
Poor	550 to 649
Bad	549 & Below

Most lenders consider a credit score between 700 and 749 to be good, but the lower cutoff can be anywhere from 680 to 720. If the cutoff is 700, a drop of just one point can push you into more expensive financing.  That’s why it’s imperative to know your credit standing and whether you’re near the border to the next category, lower or higher.

Remember that credit scores are fluid, not fixed. The information on your credit report is what shapes your credit score calculations, and that information changes every time new data is reported (every payment, every monthly balance, every account). You have credit reports at each of the three main credit bureaus: Equifax, Experian and TransUnion. The credit score calculated for each report can be different, because not every creditor reports to all three.

Image Source: http://bit.ly/2jCPE80

Each bureau calculates your credit score. Your score from each bureau is likely can change from month to month, based on factors like your payment history, the amount of available credit you have and use, whether you’ve recently applied for or opened any new credit accounts, the types of credit you use and the overall age of your credit history.

FICO® and VantageScore® provide the algorithms that the bureaus use to calculate your score. Neither company shares the details of those algorithms, but both companies use more or less the same factors to calculate your score. Payment history, including delinquencies and collections, and credit utilization (or the amount of debt you have in relation to the amount of credit available to you) carry the most weight.

You don’t have just one FICO® score or VantageScore®. Each scoring model has several variations, generally industry-specific. For example, your auto loan credit score is a little different from your credit card credit score. Lenders use different scores for different credit decisions and the lines between the score ranges may be drawn differently.

A credit rating or score (also called a Beacon or a FICO score) is not part of a regular credit report. Basically, it’s a mathematical formula that translates the data in the credit report into a three-digit number that lenders use to make credit decisions. 

Factors in determining a credit score:

Payment history. A good record of on-time payments will help boost your credit score.Outstanding debt. Balances above 50 per cent of your credit limits will harm your credit. Aim for balances under 30 per cent.Credit account history. An established credit history makes you a less risky borrower. Think twice before closing old accounts before a loan application.Recent inquiries. When a lender or business checks your credit, it causes a hard inquiry to your credit file. Apply for new credit in moderation.

Source: TransUnion Canada

The numbers go from 300 to 900. The higher the number, the better. For example, a number of 750 to 799 is shared by 27 per cent of the population. Statistics show that only two per cent of the borrowers in this category will default on a loan or go bankrupt in the next two years. That means that anyone with this score is very likely to get that loan or mortgage they’ve applied for.

What are the cutoff points? TransUnion says someone with a credit score below 650 may have trouble receiving new credit. Some mortgage lenders will want to see a minimum score of 680 to get the best interest rate.    

The exact formula bureaus use to calculate credit scores is secret. Paying bills on time is clearly the key factor. But because lenders don’t make any money off you if you pay your bills in full each month, people who carry a balance month-to-month (but who pay their minimum monthly balances on time) can be given a higher score than people who pay their amount due in full. 

This isn’t too surprising when you realize that credit bureaus are primarily funded by banks, lenders, and businesses, not by consumers.

How can I get a copy of my credit report and credit score?

You can ask for a free copy of your credit file by mail. There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus.

Complete details on how to order credit reports are available online. Basically, you have to send in photocopies of two pieces of identification, along with some basic background information. The reports will come back in two to three weeks.

The “free-report-by-mail” links are not prominently displayed — the credit bureaus are anxious to sell you instant access to your report and credit score online.

For TransUnion, the instructions to get a free credit report by mail are available here. For Equifax, the instructions are here. 

If you can’t wait for a free report by mail, you can always get an instant credit report online. TransUnion charges $14.95. Equifax’s rate is $15.50.

To get your all-important credit score, you’ll have to spend a bit more. Both Equifax and TransUnion offer consumers real-time online access to their credit score (your credit report is also included). Equifax charges $23.95, while TransUnion’s fee is $22.90. There is no free service to access your credit score.

You can always try asking the lender you’re trying to do business with, but they’re not supposed to give credit score information to you. 

Obviously, the higher the score, the more attractive you are to creditors – it’s a sign of financial responsibility and that you’re less likely to default on your loan repayments.  A good credit score indicates that you’ve been responsible with your credit accounts and have paid on time. A bad credit score reveals the opposite: that you haven’t paid your accounts on time or that you’ve had to file bankruptcy to deal with your debt. Here’s how the credit ratings are broken down:

• Excellent (741 to 900): You’re a credit superstar! The financial doors will be wide open for you: expect rapid approval for credit card and loan applications, the lowest interest rates, high credit and loan limits, and access to premium credit card benefits.
• Good (690-740): Looking good! Although your score could use a boost, you’ll still enjoy the best financial products and perks, and it’s unlikely that you’ll have trouble obtaining most credit products and loans.
• Fair/Average (660-689): This is a decent credit score that won’t hold you back too much. The lowest interest rates may not be available to you, but you can improve this credit score.
• Below Average (575-659): You’ve got some work to do. If you fall into this range, you’ll likely encounter higher interest rates for lines of credit as well as difficulty getting the best rewards credit cards.
• Poor (300-574): If you’re in this range, start doing damage control on your credit history pronto. It’s going to be quite a challenge to get credit or a loan.

In general, a rating above 690 is considered a good credit score in Canada, and is reserved for borrowers who make most of their payments on time and in full, and don’t carry high levels of debt. If you’ve got a credit score of 750 or so, you’re in excellent shape.

Why Is a Good Credit Score Important?

Credit score is very important! It’s used by lenders to assess the amount of risk they face in extending credit to you. Your credit score can affect:

• Getting a credit card. The higher your score, the better your lending options become.
• Renting a home. Believe it or not, landlords are allowed by law to ask for your credit history.
• Buying a home. Not only will a good credit score entice lenders, but it can also help you get a lower interest rate on your mortgage.
• Qualifying for a loan. The better your credit score, the lower an interest rate you can negotiate.
• Getting a job. Some jobs in Canada require applicants to pass a credit check.

Lenders place a lot of importance on credit scores during the credit application process because research shows that consumers with the highest scores are the least likely to default on their credit cards and loans. On the other hand, delinquency rates are very high with borrowers with credit scores below 600.

A good credit score put you in the best position to be approved for many credit cards and loans without having to go through a rigorous application process. Of course, mortgage and auto loan applications will still be a fairly intense process, even with a great credit score. But not only does having a good credit score improve your chances at being approved, it also lets you negotiate the best terms and interest rates on the loans you’re approved for. You may even have more access to instant approval loans and credit cards.

Not only that, but a good credit score can mean paying much lower interest rates on your existing debt.  For instance, if you have a car loan or take out a small line of credit to do home renovations, you will pay much less going forward if you have an excellent credit score.

Few people realize just how important your credit number is. With all these benefits plus the promise of better credit options at lower rates, having a healthy credit score is a worthy goal. It could potentially affect your wallet big time.

Sometimes, people talk about your credit. What they mean is your credit history. Your credit history describes how you use money:

• How many credit cards do you have?
• How many loans do you have?
• Do you pay your bills on time?

If you have a credit card or a loan from a bank, you have a credit history. Companies collect information about your loans and credit cards. 

Companies also collect information about how you pay your bills. They put this information in one place: your credit report.

What is a credit report?

Your credit report is a summary of your credit history. It lists:

• your name, address, and Social Security number
• your credit cards
• your loans
• how much money you owe
• if you pay your bills on time or late

Why do I have a credit report?

Businesses want to know about you before they lend you money. Would you want to lend money to someone who pays bills on time? Or to someone who always pays late?

Businesses look at your credit report to learn about you. They decide if they want to lend you money, or give you a credit card. Sometimes, employers look at your credit report when you apply for a job. Cell phone companies and insurance companies look at your credit report, too.

Who makes my credit report?

A company called a credit reporting company collects your information. There are three big credit reporting companies:

• TransUnion
• Equifax
• Experian

These companies write and keep a report about you.

Can I see my credit report?

You can get a free copy of your credit report every year. That means one copy from each of the three companies that writes your reports.

The law says you can get your free credit reports if you:

• call Annual Credit Report at 1-877-322-8228 or
• go to AnnualCreditReport.com

Someone might say you can get a free report at another website. They probably are not telling the truth.

What is a credit score?

A credit score is a number. It is based on your credit history. But it does not come with your free credit report unless you pay for it. 

A high credit score means you have good credit. A low credit score means you have bad credit. Different companies have different scores. Low scores are around 300. High scores are around 700-850.

Do I need to get my credit score?

It is very important to know what is in your credit report. But a credit score is a number that matches your credit history. If you know your history is good, your score will be good. You can get your credit report for free.

It costs money to find out your credit score. Sometimes a company might say the score is free. But if you look closely, you might find that you signed up for a service that checks your credit for you. Those services charge you every month.

Before you pay any money, ask yourself if you need to see your credit score. It might be interesting. But is it worth paying money for?