What is your credit score?
Your credit score is a number that lenders use to predict your creditworthiness. Your credit score is basically a three-digit number that can tell credit reporting companies a lot about your borrowing habits!
How is it calculated?
The score is calculated based on your payment history, how much you owe, how long you’ve had credit, and how often you apply for new credit. All of these factors affect your credit score.
In general, you should remember that the higher your score, the less likely lenders believe you will be delinquent on credit. If your score is above 650, you can probably qualify for a standard loan. If your score is 649 or lower, you may have some trouble getting approved for new credit.
When should you check your credit score?
If you are planning on applying for a mortgage, please remember it is very important to check your credit report a few months in advance. If your credit score is under 650, your mortgage options will be reduced, and you will pay a premium on your loan. The premium you pay could be as much as 2 to 3 per cent more than borrowers with higher credit scores. You might also need to provide more documentation than those with better scores, including a formal appraisal of your home’s value.
Since your credit score and credit report are constantly changing, it is important to review them on a regular basis. You should find out what your credit score is at least once a year. There are two main credit reporting companies in Canada, namely Equifax and TransUnion. It is a good idea to check your records with both companies to ensure you identify and correct any inaccurate information, detect any fraudulent activity, and evaluate your overall credit health.
By the way, checking your credit score will not lower it – that’s just a myth!