Your credit report consists of your financial history, which includes payments, accounts, balances, credit inquiries performed by potential lenders, landlords, and employers, and other personal information. If you’ve ever had a bank account or credit card, you have a financial history.
Your credit score is actually your result slip — quintessentially, your financial report card. It’s a number that shows you your potential creditors like landlords, lenders, and employers how efficient you are with money. The good thing is that you can better it by working to improve your financial health.
Your credit score is calculated from your credit report based on complex algorithms using the information on your credit report. There are 3 major credit reporting institutions in Canada: Equifax, TransUnion, and Experian. The 3 major credit reporting agencies use their own formulas to calculate your credit score, so your credit score may be slightly different with each agency.
So how do you keep track of your credit score?
Monitoring your credit score is easier than you think. You can now check your credit score for free, from companies like Borrowell, Equifax, TransUnion, and myFICO. Borrowell’s free credit score service will also send you monthly updates, so you can track your score and look out for any changes.
With Borrowell, all you have to do is fill in a quick online form and provide them with some information about yourself, so they can verify your identity and provide you with your free credit score. Don’t worry — according to Borrowell, your information will be safe with them.
Why should you check your credit score?
It doesn’t matter if your credit score is good or bad — you should be aware of what it is. Just like you should go to the doctor for regular health checks, it’s a good idea to check your credit score regularly to know where you stand.
Since your credit score is like your financial report card, you should know how you’re doing so you can take action to improve your credit score if it’s not doing so good.
Be sure to improve or maintain your credit score
If your credit score is pretty good now, it’s not time to sit back and gloat! Make sure know how to maintain your good credit — by doing things like keeping your utilization ratio down, paying your bills on time, and consolidating your debt if you have any.
Your utilization ratio refers to how much available credit you’re using. This is crucial as your utilization ratio contributes to 30% of your overall credit rating. If your credit card limit is $5000 and your credit card balance is $2500, your utilization ratio is 50%. This may not be the worst, but not the best utilization ratio either. In the eyes of your credit bureau, you should aim for a utilization ratio of under 70%.
Observe the unsuspected changes in your score
Minor changes in your credit score usually reflect the spending habits, but sometimes, it could be a sign of something more sinister. If your credit score drops suddenly, ask yourself if there could be a valid reason why this could be happening.
Perhaps you’ve just opened a new line of credit or applied for a new mortgage. Your potential lenders would have pulled a hard credit check on your bureau, which may result in a small ding on your credit score if you applied at multiple institutions. Soft credit checks do not affect your credit score—so things like checking your free Borrowell credit score and getting pre-approved for a loan should not hurt your score.
Unexpected changes in your credit score could be an early sign of identity fraud. Large scale security breaches are becoming increasingly common. Take the recent ones that happened to companies like Uber, Adidas, and BMO for example. The threat of identity fraud is much closer than you think.
What do identity thieves do with your personal information? They may open new accounts, take out loans without paying them back, or copy your debit and credit cards to take out money from your bank account. By monitoring your credit score regularly, you can take action once you notice an unexpected dip in your score before it is too late.
You’re about to opt for a new loan or line of credit
Consider dreaming about your ideal house for years and working really hard to purchase it. Now you’ve mustered enough money and are excited for the next big chapter of your life. You are looking to get into a mortgage loan. You finally apply for one—to your surprise, your credit score is not what you thought it would be. If your score is lower than what you expected, your home-buying dream may get destroyed.
Don’t let this be you! Make sure you’re always aware of your score so you can make more informed choices for major financial decisions in your life.
You may qualify for better credit building opportunities.
When you work on your credit score, your chances of being approved for credit cards with better interest rates, perks, and rewards improves as well. Depending on your credit card provider, you may be able to use your improved credit score as a bargaining point for lowering your credit card interest fee.
The above essay provides you with some useful information on how to monitor your credit score with companies like Borrowell, and why you should monitor it. Remember, knowing your credit score is important for your own financial well-being! Get your free credit score today from Borrowell, this won’t affect your credit score!
Lastly, take advantage of a pre-approval car loan as it is the fastest way to building good credit. Canada Auto Experts can help you in that venture. Call 1-855-550-5565 to get approved today!